
/ f ^ tAy 



REPRINT OF 

MESSAGE FROM THE 
PRESIDENT OF THE UNITED STATES 

AND REPORT OF THE COMMISSION ON 

ECONOMY AND EFFICIENCY 

RELATIVE TO 

RETIREMENT FROM 

THE CLASSIFIED CIVIL SERVICE 

OF SUPERANNUATED 

EMPLOYEES 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1912 




REPRINT OF 

MESSAGE FROM THE 
PRESIDENT OF THE UNITED STATES 

AND REPORT OF THE COMMISSION ON TIXZ. 

ECONOMY AND EFFICIENCY '7 ^ ^f 

RELATIVE TO 

RETIREMENT FROM 
THE CLASSIFIED CIVIL SERVICE 
OF SUPERANNUATED 
■ EMPLOYEES 



I 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1912 






Note. — The full report of the commission, including the appen- 
dixes in detail, was published as House Document No. 732 (62d 
'Cong., 2d sess.). The appendixes are not included in the present 
reprint. 



MESSAGE. 



To the Senate and House of Representatives: 

I transmit herewith a report of the Commission on Economy and 
Efficiency on the subject of the retirement from the classified civil 
service of superannuated employees. To the plan proposed in this 
report and set forth in detail in the accompanying draft of a bill I 
give my unqualified approval, because I believe it to be sound in 
principle and just both to the Government and to its employees. 

Necessity for a Retirement Plan. 

It is unnecessary at this time to discuss at length the necessity for 
adopting some plan by which the service may be relieved of the loss 
from the inefficiency of the personnel caused by the retention on the 
rolls, after long and faithful service, of those who have passed the 
age when they can perform a full day's work. The subject is one 
with which all administrative officers are familiar. It has been 
referred to in several messages which I have sent to the Congress and 
in many reports of the heads of departments. It is conceded by 
everyone acquainted with the situation that some action must be 
taken. Under present conditions the loss to the Government wiU 
continue to increase. Some method other than the summary dis- 
charge of employees when they become inefficient on account of age 
must be adopted. The present practice of retaining such employees 
on the rolls and, as they grow older, expecting from them a smaller 
quantity and lower grade of work can not continue indefinitely with- 
out seriously impairing the efficiency of the entire service and impos- 
ing upon the Government a cost that will be in excess of the expense 
to be incurred by the adoption of a reasonable plan for remedying 
existing conditions. 

Proposed Plan of Retirement. 

The plan submitted by the commission contemplates that each 
employee in the classified service in the executive departments and 
estabhshments at Wasliington shall be retired as soon as he reaches 
the age of 70 years and shall receive thereafter an annuity equal to 
one-half of his annual salary, with the provision that no annuity shall 
exceed $600. 

I invite particular attention to the fact that the plan provides that 
each person hereafter entering the service shall pay the entire expense 

1 



2 RETIREMENT OF SUPERANNUATED EMPLOYEES. 

of liis own retirement by contribution from his salary, so that when he 
reaches the age of 70 years the fund he has accumulated w^ill provide 
his retirement allowance. In such a case the only contribution of 
the Government, if any, will be the difference between the interest 
earned by Ms savings deposited in the Treasury and invested by the 
Government and the rate of 4 per cent per annum. So far as con- 
cerns this class of persons, there certainly can be no reasonable ob- 
jection to the plan, and I doubt if aiiy plan more beneficial both to 
the Government and to the employee could be devised. 

Employees Now in the Service. 

It is evident that the application of the plan only to those who 
hereafter enter the service would not relieve the present condition due 
to superannuation nor save the Government from the constantly 
increasing loss from that cause. It is not practicable for those now 
70 years of age, or for those nearing that age, to provide the cost of 
retirement entirely at their own expense. To meet the existing 
situation and to put a retirement plan, into effect immediately there 
must be some contribution by the Government. This contribution 
need be little more in the aggregate than is now the Government's 
loss from inefficiency due to superannuation. After a comparatively 
short period of years the annual payments made by the Government 
will be less than the loss it would sustain if no plan were adopted. 

It is proposed that an employee now in the service who has reached 
the age of 70 years shall be retired and be paid by the United States 
an annuity equal to one-half of his average annual pay for the last 
five years, but no such annuity to exceed $600. As to an employee 
less than 70 years of age, it is proposed that he shaU be retired when he 
reaches 70 on an annuity equal to one-half of his average annual pay 
for the entire period of his service (no annuity to exceed $600), and 
that there shall be deducted from his pay until he reaches 70 years 
such an amount, not exceeding 8 per cent of his pay, as, with 4 per 
cent interest, will purchase his annuity. In the case of an employee 
who has but a few years to serve before reaching 70, some contribution 
by the Government will be necessary to supplement his savings in 
order to provide an annuity of a reasonable amount. 

Annuities Limited to .1 



A retirement plan is only a means to an end and that end is an 
increase of efficiency in the public service. The Government is not 
required to take charge of an employee's finances, nor is it justified 
in doing so except so far as it is necessary to protect the Government 
against the inefficiency of the employee due to superannuation. It 
is my opinion, therefore, that a plan of retirement should be so 
adjusted as to make the least possible demand upon the Government 



RETIREMENT OF SUPERANNUATED EMPLOYEES. 3 

and at the same time draw from his personal control as little of an 
employee's money as possible. The proposed plan meets these re- 
quirements. Wliile the maximum annuity of $600 is not sufficient 
to provide the luxuries of life, it is enough to insure an employee 
against want, even if he has been so unfortunate as to have made no 
other provision for his declining years. It is sufficient also to render 
ineffectual the appeals so often made to the sympathy of adminis- 
trative officers when they attempt to remove from office an employee 
who has become inefficient through old age. At the same time the 
amount withheld from an employee's salary in order to provide his 
annuity is not sufficient to justify the thrifty in complaining that 
they are being deprived of an excessive portion of their income which 
they could invest more profitably. 

Kate of Interest on Savings. 

In any compulsory saving plan it is but just that the Government 
should guarantee a reasonable rate of interest to its employees. Four 
per cent is the rate now paid by the Government on deposits of enlisted 
men of the Army and Navy and it is the rate paid by many savings 
banks. The plan recommended by the commission contemplates the 
investment of the savings of employees in the highest class of secu- 
rities and that the United States shall contribute such amount, if any, 
as may be needed to insure the employees receiving 4 per cent per 
annum. 

Application of Plan to Employees in the District of Columbia. 

I am convinced that the application of the plan should be limited 
for the present to the classified civil service in the executive depart- 
ments and offices at Washington, where the loss from superannuation 
is the greatest. While any plan is in its experimental stage it should 
be kept within narrow limits. If successful in operation in Wash- 
ington it can be extended as the needs of the service require. 

Cost to the Government. 

It being conceded that no immediate benefit to the Government 
could accrue without some temporary help from it, I directed the 
Commission on Economy and Efficiency to make an investigation 
of the loss due to superannuation in the service at Washington. Its 
report sets forth in detail the results of this investigation. It has 
involved an examination of the efficiency of 22,754 employees, as 
such efficiency was reported by the departments. At no other time 
has such a thorough investigation been made of the service in Wash- 
ington. An earnest effort was made to ascertain and to state in 
money the financial loss which is sustained from the inefficiency of 
aged persons in the service. Wliile the loss shown as the result of 



4 KETIREMENT OF SUPERANNUATED EMPLOYEES. 

the investigation is undoubtedly much less than the actual loss 
from superannuation, the figures are sufficiently large to justify the 
Government in giving temporary aid in putting the plan into opera- 
tion. Accepting the very conservative figures as to the loss now sus- 
tained, the inefficiency in the service which is due to old age can be 
wiped out immediately and permanently in Washington by an 
average annual expenditure^ during the next 20 years of $226,986 
over and above the annual loss that v/ill be sustained from superan- 
nuation if no plan is adopted for avoiding it. The accompanying 
report shows further that the saving to the Government that will 
result from the adoption of the proposed plan will equal, in the 
course of the succeeding 16 years, the entire cost of inaugurating the 
plan. 

Straight Pensions Not Advisable. 

I am firmly convinced that the proposed plan is superior to any 
form of straight pensions, in that an employee upon retirement at any 
time may avail himself of his savings with the accrued interest, or his 
representatives may do so in the event of his death, whereas any form 
of pension or gratuity from the Government must inevitably be con- 
sidered as a part of compensation and is available only to those 
employees who succeed in living to a given age, in remaining in the 
service to that ago, and in livmg a sufficient time beyond that age to 
receive in pension payments the value of their deferred pay. Avoid- 
ing, therefore, the dangers and disadvantages of the straight pension, 
the proposed plan commends itself as satisfactory from the viewpoint 
of the Government and the viewpoint of the employees. It is advan- 
tageous to the Govejnment, since the efficiency of the service will be 
increased by providing the means of retiring those who have reached 
the age or decline. It is advantageous to the emplo3^ees, since it pro- 
tects them from want in old age with the least interference in their 
private affairs; and makes the service more attractive to the younger 
employees by facilitating promotions to higher salaries and grades at 
earlier ages than is possible under present conditions. 

Conclusion. 

A careful study of the existing situation with reference to super- 
annuation, and a consideration of the worse conditions that wUl 
appear in the future, leads me again to commend the subject to the 
earnest consideration of the Congress. I believe that the plan pro- 
posed in the commission's carefully prepared and exhaustive report is 
the best that has been devised for meeting the present and future 
needs of the service, and therefore I urge the enactment of the 
necessary legishition to put it into effect at an early date. 

Wm. H. Taft. 

The White House, May 6, 1912. 



REPORT TO THE PRESIDENT 



ON 



RETIREMENT ALLOWANCES 



SUBMITTED BY 

THE COMMISSION ON ECONOMY AND EFFICIENCY 



APRIL, 1912 



TABLE OF CONTENTS. 



Page. 
Retirement allowances 9 

Efficiency and economy in public service require retirement plan 10 

Need of retirement plan noted by Chief Executive and beads of departments.. 11 

Straight-pension plans versus contributory plans ; 16 

Objections to straight-pension plans 17 

Costliness of straight-pension plan 17 

Experience of England with straight-pension system 18 

Demoralizing effect of straight-pension system on Government service 20 

Straight-pension system would raise more questions than it would settle 21 

Pension plans suitable for private corporations not appropriate for Gov- 
ernment 21 

Sound contributory plan solution of problem of superannuation In Government 

service , 23 

Sound contributory plans proposed in recent years 24 

Calculations as to the cost of establishing these plans 24 

Table I, showing annual appropriation necessary to provide monthly 

annuity to persons in classified service June 30, 1903 25 

Table II, showing annual appropriation necessary to provide quarterly 

annuity to persons in classified service June 30, 1907 26 

Table III, showing total and comparative cost to the Government of 
• establishing plan for retiring employees under terms of Perkins and 

Gillett bills ....:... 28 

Difference in cost between straight-pension and contributory plan confer- 
ring same benefits 31 

Table IV, showing comparative cost to the Government during first 
35 years of retiring employees on straight pensions and under the 

Perkins bill 32 

Table V, showing comparative cost to the Government during first 35 
years of retiring employees on straight pensions and under the GU- 

lett bill 34 

Reluctance of Congress to provide for retirement of civil employees on account 

of expense 36 

Expense of establishing proposed contributory plan justified 36 

Arguments of employees against contributory plan answered 36 

Deductions from salaries of employees now in service should be limited. . . 37 

Government should not penalize employees leaving service 38 

Government should pay liberal rate of interest on enforced savings 38 

Both annuity and cash settlements should be arranged to protect interests 

of employee 39 

No danger in savings fund 39 

Commission's effort to ascertain annual loss to Government through inefficiency 

of aged employees 40 

Table VI, showing the number of employees in the classified civil service 
in the District of Columbia 70 years of age and over, the amount of sala- 
ries paid, the amount and per cent of salaries earned, and the amount and 

per cent of salaries unearned, or the loss due to superannuation 41 

45700°— 12 2 7 



8 TABLE OF CONTENTS. 

Commission's effort to ascertain annual loss to Government, etc. — Continued. Page. 
Reluctance of officers to report on individual employees makes figures of 

loss less than the fact 41 

Basis of estimate of future losses from superannuation 42 

Table VII, showing the number of employees in the classified civil service 
in the District of Columbia, distributed according to age, the total salaries 
paid, the total salaries earned, the per cent of salary earned, and the per 

cent of salary not earned 42 

Per cent of salary earned at various ages 44 

Age at which loss justifies retirement 44 

Method of calculating future loss to Government from superannuation .... 46 
Diagram showing the per cent of salary earned, based on department 

reports, and the percentages found by graduation 47 

Table VIII, showing the annual loss that will be sustained by the 
Government during the next 36 years if no plan is adopted for retiring 
employees now in the classified civil service in the District of Colum- 
bia when 70 years of age 48 

Commission's effort to determine what expense the Government is justified in 

incurring to avoid loss from superannuation 48 

Plan presented by the commission 50 

Table IX, showing the total maximum cost of retiring at age 70 all employees 
now in the classified civil service in the District of Columbia on annuities 
equal to one-half pay (maximum |600), maximum deduction from salary 

8 per cent 51 

Cost of establishing proposed plan 51 

Table X, showing the net cost to the Government of establishing the 

plan and the gain to the Government from its establishment ... 53 

Table XI, ehowilig the deductions required from salaries at various ages. 54 

Recommendatibns of the commission 55 

Di^ftofbill 58 

Appendixes: ^ . . . 62 



RETIBEMENT ALLOWAl^OES. 

April 18, 1912. 
The President : 

The Commission on Economy and Efficiency has the honor to sub- 
mit the following report on "Retirement allowances." The report 
and recommendations apply to the employees in the permanent 
classified service in the executive departments and independent 
Government establishments in the District of Columbia. The plan 
submitted provides for three classes of employees: 

(a) Employees in that service who have reached the age of 70 
years when the plan is put into operation. 

(b) Employees in that service who are less than 70 years of age 
when the plan is put into operation. 

(c) Persons who enter that service after the plan is put into opera- 
tion. 

The essential features of the plan, which are set forth in detail in 
the draft of bill at the end of this report, and which require legisla- 
tion to carry them into effect, are the following: 

1, That an employee now in the service who is 70 years of age be 
retired, and be paid by the United States an annuity equal to one- 
half of his average annual pay for the past live years, but no such 
annuity to exceed $600. 

2, That an employee now under 70 years of age be retired when he 
reaches that age and be paid an annuity equal to one-half of his aver- 
age annual pay for the entire period of service, but no such annuity 
to exceed $600; provided, that there shall be deducted from the pay 
of such employee until he reaches 70 years an amount which, with 
interest at 4 per cent, compounded annually, will purchase such 
annuity, but no monthly deduction shall exceed 8 per cent of the 
moiithly pay. 

3. That a person first employed after the retirement plan is put 
into operation shall provide for the entire cost of his retirement allow- 
ance (which shall be an annuity of one-half of his average annual 
pay during his entire service, but no annuity to exceed $600), by 
deductions from his current pay of such amounts as may be required, 
with interest at 4 per cent, compounded annually, to pay his annuity. 

4. That any person separated from the service before the age of 60 
shall receive the amount of deductions made from his pay, with 4 per 
cent interest, compounded annually; after the age of 60, and before 
reaching 70, he shall receive the amount with interest in 10 annual 
installments, unless the total amount is less than $600, in which case 
the aihouiit shall be paid at once. In case of death at any tinie before 

9 



10 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

reaching 70, the amount of deductions, with interest, shall be paid to 
his legal representatives. In case of death after 70, the balance re- 
maining to his credit over and above the sums paid to him in annuities 
shall be paid to his legal representatives. 

5. That the Secretary of the Treasury shall invest the deductions 
and accrued interest thereon in bonds of the United States, States, 
and municipalities; and the United States shall appropriate a sum 
sufficient to assure to employees interest at 4 per cent per annum, 
compounded annually, on all deductions from salaries. 

In the discussion of the subject in this report, the commission has 
presented its reasons for the conclusions it has reached concerning the 
best plan for relieving the Government of the large direct and indirect 
loss due to superannuation among its clerical force in the executive 
service in the District of Columbia. The total cost to the Govern- 
ment during the next 30 years, in payment of annuities to employees 
to be now retired and of a part of the annuities of those hereafter re- 
tired, will be but a small amount in excess of the loss from superannua- 
tion that will occur if no retirement plan is adopted. The cost for 
those retired on an annuity paid in part by the United States wUl soon 
thereafter be reduced to an inconsiderable sum, and be much less than 
would be the loss from superannuation. All employees retired after 
30 years from the taking effect of the plan will provide all the money 
needed to pay their own annuities. 

Without doing an injustice to any faithful employee, but on the 
other hand conferring an immediate benefit on many by more rapid 
promotion, the plan will confer a definite and substantial benefit on 
the service as a whole and increase to a marked degree the efficiency 
of the personnel. 

SAVINGS AND ANNUITY PLAN PROPOSED FOR RETIREMENT OF 
CIVIL-SERVICE EMPLOYEES. 

Efficiency and Economy in Public Service Require Retire- 
ment Plan. 

The Commission on Economy and Efficiency has made a thorough 
investigation of the personnel of the civil service in the District of 
Columbia and is convinced that the service can never be brought up 
to the highest possible standard of efficiency until a satisfactory plan 
for the retirement of the aged employees is adopted by the Govern- 
ment. Any comprehensive scheme for the improvement of the civil 
service must include a proper plan of retirement for civil servants. 
While it is true that the laws regulating the civil service do not 
insure a permanent tenure of office, but on the contrary specifically 
provide for the removal of the inefficient, the fact is well known that 
this provision of law is disregarded whenever inefficiency is the result 
of old age; nor does this commission believe that Congress will insist 



EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 11 

upon administrative officers removing inefficient old people from the 
service so long as no retiring allowance has been provided for them. 
The work of the Government offices must therefore continue to be 
retarded by the inefficiency of aged clerks imtil such time as a 
retirement law is put into operation. The commission feels, there- 
fore, that it can not lay too great emphasis on the fact that, without 
a provision for retiring aged employees, it is idle to expect either 
thorough efficiency in the public service or the closest economy in 
the expenditure of salary appropriations. 

Need of Retirement Plan Noted by Chief Executive and 
Heads of Departments. 

For years past heads of departments and chiefs of bureaus have 
called attention in their annual reports to the need of a proper system 
■of retiring the aged employees, and recently the matter has received 
the special attention of the Chief Executive. 

The subject of superannuation in the public service has received the 
a,ttention of President Taft in three annual messages to Congress. In 
his message to Congress in 1909, under the caption of "Reduction in 
the cost of governmental administration," he recommended legisla- 
tion for the retirement of superannuated civU servants, couphng 
with it a recommendation for an increase of salaries. He said: 

More than this, every reform directed toward improvement in the average efficiency 
of Government employees must depend on the ability of the executive to eliminate 
from the Government service those who are inefficient from any cause, and as the 
degree of efficiency in all the departments is much lessened by the retention of old 
employees who have outlived their energy and usefulness, it is indispensable to any 
proper system of economy that provision be made so that their separation from the 
service shall be easy and inevitable. It is impossible to make such provision unless 
there is adopted a plan of civil pensions. 

Most of the great industrial organizations and many of the well-conducted railways 
of this country are coming to the conclusion that a system of pensions for old employees 
and the substitution therefor of younger and more energetic servants promotes both 
economy and efficiency of administration. 

I am aware that there is a strong feeling in both Houses of Congress, and possibly in 
ihe country, against the establishment of civil pensions, and that this has, naturally, 
grown out of the heavy burden of military pensions, which it has always been the 
policy of our Government to assume; but I am strongly convinced that no other prac- 
tical solution of the difficulties presented by the superannuation of civil servants can 
be found than that of a system of civil pensions. 

The business and expenditures of the Government have expanded enormously since 
the Spanish War, but as the revenues have increased in nearly the same proportion as 
the expenditures until recently the attention of the public and of those responsible 
for the Government has not been fastened upon the question of reducing the cost of 
administration. We can not, in view of the advancing prices of living, hope to save 
money by a reduction in the standard of salaries paid. Indeed, if any change is made 
in that regard, an increase rather than a decrease will be necessary; and the only 
means of economy will be in reducing the number of employees and in obtaining a 
greater average of efficiency from those retained in the service. 



12 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

In his next annual message to Congress (19 JO) President Taf t went 
still further and recommended a definite plan— the one discussed in 
this report — -and a definite bill, the Gillett bill (H, R. 22013), as 
the one, in his judgment, best calculated to solve satisfactorily the 
problem of superannuation in the civil service. He said: 

It is impossible to proceed far in such an investigation without perceiving the nee<J 
of a suitable means of eliminating from the service the superannuated. This can be 
done in one of two ways; either by straight civil pension or by some form of con- 
tributory plan. 

Careful study of experiments made by foreign governments shows that three serioua 
objections to the civil pension payable out of the Public Treasm-y may be brought 
against it by the taxpayer, the administrative officer, and the civil employee, respec- 
tively. A civil pension is bound to become an enormous, continuous, and increasing 
tax on the public exchequer; it is demoralizing to the service since it makes difficult 
the dismissal of incompetent employees after they have partly earned their pension; 
and it is disadvantageous to the main body of employees themselves since it is always 
taken into account in fixing salaries, and only the few who siu-vive and remain in the 
service until pensionable age receive the value of their deferred pay. For this reason 
after a half century of experience under a most liberal pension system, the civil 
servants of England succeeded, about a year ago, in having the system so modified 
as to make it virtually a contributory plan with provision for refund of their theoretical 
contributions. 

The experience of England and other countries shows that neither can a contributory 
plan be successful, human nature being what it is, which does not make provision for 
the return of contributions, with interest, in case of death or resignation before pen- 
sionable age, Followed to its logical conclusion this means that the simplest and 
most independent solution of the problem for both employee and the Government is a 
compulsory savings arrangement, the employee to set aside from his salary a sum suffi- 
cient, with the help of a liberal rate of interest from the Government, to purchase an 
adequate annuity for him on retirement, this accumulation to be inalienably his 
and claimable if he leaves the service before reaching the retirement age or by his 
heirs in case of his death. This is the principle upon which the Gillett bill now 
pending is drawn. 

The Gillett bill, however, goes further, and provides that the Government shall 
contribute to the pension fund of those employees who are now so advanced in age 
that their personal contributions will not be sufficient to create their annuities before 
reaching the retii-ement age. In my judgment this provision should be amended so 
that the annuities of those employees shall be paid out of the salaries appropriated 
for the positions vacated by retirement, and that the difference between the annuities 
thus granted and the salaries may be used for the employment of efficient clerks at the 
lower grades. If the bill can be thus amended, I recommend its passage, as it will 
initiate a valuable system and ultimately result in a great saving in the public ex- 
pend! tiu-es. 

In the President's message to Congress, December 21, 1911, it was 
said : 

I have already advocated, in my last annual message, the adoption of a civil-service 
retirement system, with a contributory feature to it so as to reduce to a minimum the 
cost to the Government of the pensions to be paid. After considerable reflection, I am 
very much opposed to a pension system that involves no contribution from the em- 
ployees. I think the experience of other Governments justifies this view; but the 
crying necessity for some such contributory system, with possibly a preliminary gov- 
ernmental outlay, in order to cover the initial cost and to set the system going at once 
while the contributions are accumulating, is manifest on every side. Nothing will so 
much promote the economy and efficiency of the Government as such a system. 



BEPORT TO THE PBESIBENT ON RETIREMENT ALLOWANCES. 18 

In his report for 1911 the Secretary of tlie Treasury expressed him- 
self in favor of a retiring allowance for the superannuated, as follows: 

The executive departments are suffering exti-emely for want ol a retirement law; 
and all improvements of the public service have to constantly meet the discourage- 
ments of this condition, while much improvement is by this condition disco.uraged 
even from a beginning. I appeal, therefore, to Congress again, as I have doAe each 
year, in behalf of such a law. Every consideration of humanity, economy, and 
efficiency that is conceivably related to the question calls for action at this session. 

The retirem.ent system which I consider most in the interest of the clerks themselves 
is the contributory system; and that would cost the Government no money whatever — 
if that were thought to be desu'able. That this system could be put into operation 
without increased expenditures, I believe is entirely true; and I think it could be 
adopted with the provision that each department should put it into operation without 
any cost to the Government; but it is at the same time a question whether that w;Quld 
be the best course to pursue. This contributory system, if adopted, would leave the 
claims of the clerks to revised or higher salaries unaffected. On the other hand, th'^ 
so-called straight pension — the pension paid wholly by the Government — would take 
the place of any possible advance in salaries for, at any rate, a considerable period, 
notwithstanding the fact that under such a system comparatively few of the clerks 
would ever become beneficiaries. 

However, some system of retiring allowance is so greatly needed as an aid to economy 
and efiiciency that I would be glad to see any system adopted which could be put 
into effect immediately; for any system could bo changed after experience showed 
its defects. (Annual Report of the Secretary of the Treasury, 1911, p. 7.) 

In his report for 1911 the Secretary of War called attention to the 
need of a plan for the retirement of the aged employees as follows: 

I am heartily in favor of some measure by which employees of the Federal Gov- 
ernment may be retired and pensioned when they reach a condition of impaired use- 
fulness after years of faithful service. In taking such action we should only be fol- 
lowing the world-wide trend of national Governments and large business corporations, 
whether we find warrant for such action in humanitarian principles or considerations 
of a sound business policy, or both combined. 

The purely monetary rewards and opportunities of the Government service ought 
not to be and never will be so great as those offered in the business and professional 
world elsewhere, and if the Government service is to be maintained upon a high and 
increasing level of proficiency it must meet the competition from other quarters by 
some compensating features that will attract the best talent to its service and retain it. 

While I am not prepared to express a decided conviction as between a straight-out 
Government pension and one to which the employee himself shall have contributed 
a portion, there is abundant proof that the Government, in effect, though indirectly, 
has for many years throughout its service maintained a pension system without retire- 
ment, and if it should now establish a pension system with retirement there is good 
reason to believe that in the long run it would not only suffer no pecuniary loss, but 
on the contrary would reap a substantial gain in the increased efficiency and improved 
morale of the service. (Annual Report of the Secretary of War, 1911, p. 33.) 

In his report f or 1911 the Postmaster General called attention to the 
need of a, system of retiring the aged employees, as follows : 

Almost without exception foreign nations provide for the pensioning of civil-service 
employees when they become superannuated . Large corporations in this country are 
rapidly adopting the sanie principle in the reliremout of their aged employees. On 
business grounds, if for no other reason, the Government should do likewise. 



14 KEPOB-T TO THE PEESIDENT ON RETIREMENT ALLOWANCES. 

While the compensation of postal (>mployees has been considerably increased dur- 
i 11,^' the last few years, it is hardly more than sufficient to meet necessary living expenses 
and consequently does not permit the putting aside of any considerable savings against 
old age. It is believed that a civil pension based on length of employment should be 
granted by the Government. Benefits to the service far outweighing the expense of 
such pensions would undoubtedly result. (Annual Report of the Postmaster General, 
.1911, p. 15.) 

The Secretary of the Navy said in his annual report for 1911: 

Not only should increased compensation be provided for the clerks, but legislation 
should be enacted looking to the establishment of some form of civil-service retirement. 
I am not prepared at this time to advocate any particular system, believing that this 
is a matter which shoidd be determined by Congress after careful consideration; but 
xmlesH some provision be made for the pensioning or retiring of superannuated civil 
employees the Government can nev(>r ho])e to secure the most efficient and satisfactory 
service. 

There is no class of employees who are more deserving of increased compensation 
and retirement with reasonable pay than the employees of the Government. Very 
few of them are able to accumulate much, if anything, during their long years of 
service, and when old-age disability does come to them they must either be carried 
as a burden on the Government's rolls or thrown out on the world with, no suitable 
}>rovision for tlieir last years. 

But, aside from all sentimental considerations, I believe that civil-service retire- 
ment by the Government would be along the line of sound business management. 
Many railroads and industrial corporations have found it advisable to adopt such a 
system, and the practice is a growing one. 

I earnestly recommend that suitable legislation be had in this matter. (Annual 
Report of the Secretary of the Navy, 1911, p. 18.) 

In his last annual report (1911) the Secretary of the Interior treats 
of the subject as follows. He says: 

I earnestly recommend the enactment of legislation authorizing tlie retirement of 
employees who, after long and faithful service, are disabled by age or infirmity from 
the efficient performance of their duties. The civil servants of the Government, like 
those in the military and naval service, are debarred from the chance of large gains, 
the hope of which is a constant stimulus to men in ])rivate business. Moreover, those 
of technical or superior administrative ability are and must continue to be paid smaller 
salaries than they would command in private employment. It is therefore impossible 
for them to acquire financial independence or make due provision for old age, either 
by way of profits or by way of savings from their salaries. Considerations of humanity 
and justice might well bo urged against the dismissal of employees who have given the 
years of their strength to faithful and efficient public service and against their assign- 
ment to the lower grades of menial or clerical duties as an alternative to dismissal. 
But I prefer to put the matter on other and more selfish grounds. The Government 
simply can not afford not to retire these employees with due and honorable provision 
for their old age, and this for two reasons. 

In the first place, many able and energetic men serve the Government at salaries 
far below the commercial standard for like services. They choose to do so because 
the public service saj;isfies their best and highest ideals of personal integrity and 
professional achievement. Such men are continually forced out of the service by the 
necessity of making due provision for themselves and their families before old age 
comes upon them. If the Government would insure them against this peril, it could 
continue to employ them at salaries far less tlian a private corporation would be com- 
pelled to pay. Every consideration of economy and sound business policy requires 
that tlieir services should be retained on terms so favorable to the Government. The 
loss, taken in the mass, is irreparable, for the system operates as a survival of the 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 15 

unfittest by continually drawing off the more energetic and abler men, leaving a 
larger and larger proportion of the inefficient in the public service. In the second 
place, the Government is paying much, if not most, of the cost of a proper retirement 
system through the inevitable relative inefficiency of the present plan. Not only 
are superannuated employees dropped to and retained in the lower grades because of 
sympathy yielding to personal or political pressure, but in the higher grades, from 
which the rank and file of the service inevitably derives its spirit and tone, there is a 
tendency to retain men who have lost the alertness and qnthusiasm essential to the 
highest efficiency of their own work, and still more essential for inspiring in and 
requiring of their subordinates such alertness and enthusiasm. Not only do they 
thus fail to make the positive contribution to the general efficiency of the service 
which is due from men in their position, but they have a negative effect in the same 
direction by blocking the avenues of promotion and legitimate ambition. The men 
below them not only fail to receive the proper stimulus of precept and example, but 
are at the same time deprived of the hope of promotion which ought to be the reward 
of efficient service. 

This condition is now becoming apparent. It has been delayed by the fact that the 
widespread application of the principle of permanency in the public service goes back 
less than one generation, and by the further fact that the industrial and social problems 
of recent years have forced the Government into new fields of activity and thus com- 
pelled the organization of new bureaus and departments. These new administrative 
units have been largely recruited from young men who are still m the prime of life. 
Many of the older bureaus and departments have from similar causes largely increased 
their personnel, re(!ruiting them chiefly from young men. This sudden expansion of 
governmental activities has postponed and mitigated the worst evils inherent in the 
present system; but sudden expansion can not continue indefinitely. We must face 
and provide for normal conditions of growth . Under such conditions general efficiency 
in the public service is impossible without due provision for the retirement of aged 
employees. This is attested by the experience and practice of foreign governments, 
which have long had a permanent civil service, and by that of large railroad and com- 
mercial corporations in our own country. (Annual Re])ort of the Secretary of the 
Interior, 1911, p. 17.) 

In his annual report for 1911 the Secretary of Commerce and Labor 
points "wdth emphasis to the need of a suitable provision for the retire- 
ment of the aged employees. He said: 

Superannuation in the civil service and the proposed retirement of employees who 
have passed their age of greatest usefulness have attracted much attention. Consider- 
able discussion of the subject has appeared in the public press, and many Government 
officials in reporting on conditions alTecting the personnel of their respective depart- 
ments or offices have laid more or less stress on the evils of superannuation in the 
service and the necessity of providing, as has been done by a number of countries and 
private business concerns, some eauitable scheme of retirement of those who are no 
longer able to render a fair degree of service, but who would be left without adequate 
means of support if dismissed. Many difficulties, of course, may be expected to attend 
the passage of any law looking to the retirement on pay of superannuated employees in 
the civil service, whether such retirement is accompanied by annuities paid outright 
by the Government or whether it is made possilWo by contribution in whole or in part 
by the employees themselves. 

Incomplete reports recently received from the bureaus show that there are 72 
employees of this department who are more or less superannuated; that the aggregate 
of their salaries is $73,385; and that their average age is 70 years. Perhaps a greater 
amount of superannuation and consequent loss to the Government may be found in the 
older departmenl,s and offices. As this department last year reported its opinion on 
the subject of superannuation, it is unnecessary to again point out the advantage and 
45700°— 12 3 



16 KEPORT TO THE PEESIDENT ON RETIEEMENT ALLOWANCES. 

economy that would result from the retirement, which practically everybody admits 
should be on an adequate annuity, of the civil employees of the Government who have 
become inefficient through advancing age. (Annual Report of the Secretary of 
Commerce and Labor, 1911, p. 33.) 

The following is a partial list of references to reports and state- 
ments of officers of the Government calling attention to the need of a 
means of retiring the superannuated employees on proper allowances: 

4 

Annual messages to Congress of William Howard Taft, President of the United 
States, 1909, 1910, 1911. 

Annual reports of Franklin MacVeagh, Secretary of the Treasury, 1909, 1910, 1911. 

Annual reports of Ethan A. Hitchcock, Secretary of the Interior, 1904, 1905. 

Annual report of James R. Garfield, Secretary of the Interior, 1908. 

Annual report of Richard A. Ballinger, Secretary of the Interior, 1909, 1910. 

Annual report of Walter L. Fisher, Secretary of the Interior, 1911. 

Annual report of Oscar S. Straus, Secretary of Commerce and Labor, 1908. 

Annual reports of Charles Nagel, Secretary of Commerce and Labor, 1910, 1911. 

Annual reports of Frank H. Hitchcock, Postmaster General, 1909, 1910, 1911. 

Annual report of Joseph Stewart, Second Assistant Postmaster General, 1909. 

Annual reports of Civil Service Commission, tenth, eleventh, nineteenth, twentieth, 
twenty-second, twenty-fifth, and others. 

Report of Committee on Department Methods (Keep Commission), 1907. 

Annual reports of Merritt O. Chance, Auditor for the Post Office Department, 
1909, 1910. 

Hearings before the House Committee on Reform in the Civil Service, 1896, 1904, 
1908, 1912. 

Statement of E. F. Ware, Commissioner of Pensions, February 9, 1904. 

Statement of Gen. F. C. Ainsworth, Chief of the Record and Pensions Office, War 
Department, February 12, 1904. 

Statement of Frederick I. Allen, Commissioner of Patents, February 26, 1904. 

Statement of William H. Moody, Secretary of the Navy, March 5, 1904. 

It is apparent from the foregoing that the executive officers of the 
Government are agreed in thinkmg that the highest economy and 
efficiency are not possible in the administration of the public offices 
untn legislation is enacted for the retirement of superannuated 
employees. Most of them hesitate to indicate preference for any 
particular plan of retirement, feeling, apparently, that it is a matter 
to be worked out by experts. 

Straight-Pension Plans versus Contributory Plans. 

The Commission on Economy and Efiiciencyhas given consideration 
to the various plans that have been proposed for the retirement of 
superannuated employees, and finds that they may be divided into 
two groups : 

First, noncontributory plans — commonly referred to as straight 
pensions — proposmg the payment of annuities to the superannuated 
employees out of the Federal Treasury; and, 

Second, contributory plans proposing the deduction of stated 
sums — more or less adeqtiate for the purpose in view — from the 
salaries of all employees out of which to pay amiuities to retiring 
employees. 



report to the president on retirement allowances. 17 
Objections to Straight-Pension Plans. 

The first group of plans — those proposing the payment of annuities 
out of the Federal Treasury — are found on analysis to be so costly 
and so demoralizing to the service as to make them incompatible with 
any general scheme for economy and efficiency in the public service. 

The cost of a civil pension in every country where it has been tried 
for any considerable length of time is admittedly very great. How- 
ever modest the pension roll in the beginning, it is bound inevitably 
to grow in length and increase in costliness as time goes on. This is 
due to the fact that, under any system which legalizes a draft on- the 
Public Treasury, there is a constant tendency to extend its benefits 
to new classes of public servants and to the dependents of deceased 
employees. Under an elective Government, where those who control 
the pension must depend on popular favor for their power, there is 
a constant tendency also to lower the retirement age in order to 
serve some political interest by creating a vacancy. Indeed, a pen- 
sion system may easily become, in the hands of unscrupulous poli- 
ticians, a means of removing political opponents to make places for 
political adherents. This situation may even develop in a country 
where there is a strong sentiment in favor of promotion on merit, for 
a certain number of offices are likely always to be in the appointive 
class and therefore not filled by promotion^ from below. If the 
incumbents of these offices can be removed without serious oppo- 
sition on their part by retiring them in the prime of life on life pen- 
sions, the ministers of a hostile party are very likely to be strongly 
tempted, as was the case 20 years ago in Canada, to eliminate them 
thus at the expense of the public. This can be accomplished only 
at imimense expense to the people, since the cost of a life annuity at 
the younger ages is so much greater than at the older ages. 

COSTLINESS OF STRAIGHT-PENSION PLAN. 

A system of pensions paid from the Public Treasury usually starts 
with a simple provision that employees who have served a given 
number of years shall, on reaching a certain age, be retired on an 
allowance. This allowance is customarily on the average salary 
received by the employee during the last three or five years of service. 
In the beginning, the system is attractive to the employee because 
the pension appears to be an addition to his compensation. The 
system once established, the pension is, in the very nature of things, 
regarded by the employee as something to which he has a right. 
Before long the families of employees who die a short time before 
being placed on pension, or soon after retirement, begin to complain 
that the loss of the pension on the death of the employee, who perhaps . 
has served the Government long and faithfully, is a hardship to 



18 REPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

which, they should not be subjected, and a movement is then set on 
foot to continue the pension to the widows and orphans of such 
employees. This extension of the pension benefits to the families of 
deceased employees increases the expenditures for pensions at an 
enormous rate, and finally the expenditures for pensions are regarded 
by the Government as a part of the expenditures for salaries, being 
spoken of, for instance, in England as "the ineffective vote" in con- 
trast to "the effective vote" or salary list. Salaries are naturally 
fixed thereafter with respect to the value of the prospective pension, 
and persons considering the advisability of entering the public service 
must, in the very nature of things, consider the pension in deciding 
whether they* will accept Government employment. With new en- 
trants, the prospective pension is even a greater and more direct con- 
sideration for the service rendered than it is with the old incumbents, 
showing that it comes inevitably to be regarded as part of the com- 
pensation of the office. The result is that the pension tends to keep 
the current pay inadequate. In England, for instance, pensionable 
employees receive less compensation than nonpensionable employees. 
Furthermore, until the benefits are extended to the widows and 
orphans, the pension system works an injustice against the families 
of those who die in the service, since it prevents them from receiving 
the deferred portion of the employees' pay. Viewed in its proper 
light, therefore, the civil pension must be regarded as a pure tontine 
in which all persons lose except those who succeed in three things: 
Living to a certain age, remaining in the service until that age, and 
living beyond "that age long enough to get back the value of their 
theoretical contributions. 

EXPERIENCE OF ENGLAND WITH STRAIGHT-PENSION SYSTEM. 

In this connection, the experience of England is especially note- 
worthy and illuminating. A free and universal pension system for 
the benefit of civil servants was established in 1859. The system was 
popular at first, but soon came to be regarded with dislike by the 
civil servants. They ceased to consider it as a pure gratuity and 
came to think of it as a benefit paid for by themselves out of reduc- 
tions in salary, since nonpensionable employees were shown to be 
better paid than pensionable. Since statistics showed also that not 
more than one out of seven entrants into the service remained to 
pensionable age, they saw that their pensions were subject to large 
chances of forfeiture by death or resignation and that their families 
were then worse off than would have been the case had there been 
no pension system. Approximately 70,000 of the 100,000 individ- 
uals in the service in 1902 organized themselves into a committee 
called the deferred-pay committee, in order to agitate for a change 
in the pension system. Their claim that pensions were deferred 
pay was sustained by the royal commission appointed to inquire into 
the matter, and the employees then demanded that, on separation 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 19 

from the service, the value of part of their theoretical contributions, 
should, in justice to their families, be returned to them either in the 
form of insurance or in cash. The pension system was accordingly 
modified as follows : The pensions have been reduced from one-sixtieth 
to one-eightieth of salary for each year of service, but in addition to his 
pension the employee is given a cash sum equal to one- thirtieth of 
his salary for each year of service, with a maximum of a year and a 
half's pay, and the families of those who die after five years of service 
receive a lump sum equal to one year's salary. 

England's experience in granting pensions to its civil employees 
is fully discussed in a recent report entitled '-'Civil Service Eetire- 
ment in England and New Zealand," published as Senate Docu- 
ment No. 290, Sixty-first Congress, second session. The conclusions 
reached in that report are as follows : 

The important point to note is that the commission conceded that something was 
deducted from the employee's pay for the purpose of pensioning him at the end of his 
period of service. The English pension system is therefore not a free and absolute sys- 
tem of gratuities at all, but a system of theoretical contributions from the employees' 
salai-ies, more or less adequate to pay the benefits given. Whatever it may have been 
in the beginning, that is what it has become through the policy — a policy sure to 
develop under a system of gratuities, human nature being what it is — of taking the 
pension into consideration in fixing salaries. * * * 

The question whether the present improved system is absolutely equitable as be- 
tween individuals is difficult of satisfactory answer. It has been shown that it is more 
equitable than the old system; but it can not be shown whether the amounts received 
by the employee in the form of pension, insurance, and cash-surrender values corre- 
spond with the amounts contributed l»y him, since it has not been ascertained what 
percentage of salary is withheld as a contribution. The Courtney commission main- 
tained that the theoretically contributed sum is no more, in the aggregate, than the 
amount required for pensions, but this does not prove that the sum contributed by any 
individual may not be more or less than what he should equitably contribute. A 
deduction of a given percentage of salary may be entirely adequate to furnish given 
benefits for a young man, while a deduction of the same percentage of salary will be 
quite inadequate to provide the same benefits for an old man. The failure of the 
Courtney commission to gratify the request of the employees for a full investigation 
into the subject so that the amounts actually withheld might be definitely determined 
makes any redistribution of benefits merely a guess rather than an exact calculation. 
In the absence of the necessary data it is therefore impossible to answer the question: 
Is the present system absolutely equitable as between individuals? 

While it is to be assumed that the calculations made by the actuaries are unimpeach- 
able, it IS to be noted that those calculations were limited in scope and undertaken 
merely to ascertain what benefits could be given by reducing the pension one-quarter. 
The problem of the actuaries wa,s to distribute equitably a definite sum. They were 
not asked to go further back and devise a contributory scheme that would be just as 
between the state and the individual or equitable as between different classes of 
individuals. The amended system is held to be merely a scheme of redistribution, 
but it should not be forgotten that only one-quarter of the amount to be distributed 
has been subject to actuarial calculation . Whether the other three-quarters have been 
equitably distributed can not be stated . 

One thing, however, can be definitely stated regarding the present system in com- 
parison with a system where the contributions are actually instead of only theoreti- 
cally paid, and where they are funded and invested at interest. It is less economical. 



20 REPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

Under the existing system, the necessary sum is appropriated each year out of the 
Treasury for the payment of pensions. This sum amounts to from 16 to 20 per cent, in 
the various departments, of the sums paid for salaries. Under a contributory system, 
the necessary sum would be accumulated gradually from many contributions invested 
at interest. By reason of the fact that wdth the help of compound interest at the rate of 
3 per cent per annum, the sum of a given contribution per annum will double itself in 
the course of a service of 42 years, and at 3^ per cent in 36 years, and at 4 per cent in 
31 years, it follows that the total contributions of an employee who serves 40 years 
need be less than half the amount required by direct appropriation from the Treasury 
to give the same pension. The question naturally suggests itself then: Why would it 
not be a wiser distribution of funds, if the British Government in appropriating a sum 
for the maintenance of civil establishments (including an amount for salaries and 
another amount for pensions) should increase the salaries by the amount of the sum 
spent for pensions, but require employees to pay out of their salaries a contribution 
sufficient to meet the cost of pensions? The net result of thus preferring a scheme of 
actual contributions to one of theoretical contributions would be a general increase in 
salaries without increasing the appropriations for either salaries or pensions, thus 
effecting a saving of money to the employees that, under present conditions, is lost. 
(See Civil Service Retirement in Great Britain and New Zealand, S. Doc. No. 290, 
61st Cong., 2d sess., pp. 183-185.) 

In view of this experience, the commission can not recommend any 
system of retirement allowances to be granted as a reward for services 
inadequately paid for at the time the service is rendered, for it believes 
that the civil employees should receive proper and adequate compen- 
sation for their services at the time the services are rendered. 

DEMORALIZING EFFECT OF STRAIGHT-PENSION SYSTEM ON GOVERN- 
MENT SERVICE. 

Besides burdening the Government with an enormous expense for 
personal services, which, m the nature of the contract, can not be 
distributed among the employees in proportion to the value of the 
services rendered, a straight pension is objectionable because it pro- 
motes inefficiency. The argument is advanced by those who favor 
the straight pension that the pension should be regarded not as part 
payment for services rendered but as a reward for continuity of 
service. This is in fact a distinction without a difference, since a 
reward must, in the nature of things, be a compensation for some 
service rendered. Whatever the theory advanced, the Government 
is unable in practice to prevent the employee from taking the value 
of the pension into consideration, whether his service be of long or 
short duration. The promise of the reward is considered by the 
employee as a part of his contract of employment. As soon as the 
Government establishes this system of rewards for continuity of 
service, it must immediately devise ways and means of honorably 
terminating the contract with employees whom it is desirable to 
remove. This means that it is necessary to establish a scale of sur- 
render values which must be given employees dismissed from the 
service to compensate them for the loss of the pension which they 
have partly earned. This again results in an enormous increase in 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 21 

the expense of running the Government offices, but there is no escape 
for the Government that has once adopted a straight pension unless 
it abandons its standard of efficiency. The two horns of the dilemma 
which it thus creates for itself are either retention in office of all the 
inefficients who are under the age of retirement or the increase of the 
pension charge by the amount paid to all those removed before pen- 
sionable age. There is no escape through the contention that the 
pension is to be awarded only m case of faithful or efficient service, 
since whether the service rendered has been of a quality that would 
entitle the employee to a pension is always debatable. Certainly 
without a system of ''gratuities" or ''compensation for loss of office" 
in addition to the pension system the dismissal of the inefficient 
becomes difficult, if not almost impossible, since it is hard for the 
superior officer to cause his subordinate not only loss of position, 
especially if he is without resources and has a family dependent on 
him, but also loss of the pension which he has partly earned and 
which he counts as an asset of office as much as he does his salary. 
The result of this reluctance m such cases must be a breaking down 
of the moral tone of the whole service. 

Nor is this the whole catalogue of evils sure to spring from adopt- 
ing the theory that a pension is a reward for continuity of service. 
Not only is the Government forced to protect itself against the reten- 
tion of the mcompetent by granting them a compensation for loss of 
office, but it is logically obliged then to grant a gratuity to those who 
voluntarily retire from the service before reaching pensionable age. 
To do otherwise would be to put a premium on inefficiency. 

Straight-Pension System Would Raise More Questions Than 

IT Would Settle. 

The commission desires, therefore, to emphasize the point that, 
in considering the adoption of a system of pensions for Federal em- 
ployees, the problem is not merely the cost and advisability of pen- 
sioning the comparatively few employees now eligible for retirement, 
but embraces a great deal more than that. It includes the question 
of extending pension benefits to widows and orphans and giving the 
commuted values of pensions or gratuities to all who leave the service 
before pensionable age. In the opinion of the commission the estab- 
lishment of a civil pension payable out of the Federal Treasury would 
thus raise more questions than it would settle. 

PENSION PLANS SUITABLE FOR PRIVATE CORPORATIONS NOT APPRO- 
PRIATE FOR GOVERNMENT. 

It is true that in recent years many of our railroads and other large 
business institutions have established pension systems under which 
superannuated employees are retired on allowances provided by the 
institution, without contribution by the employees, and that the 



22 EEPOET TO THE PRESIDENT ON EETIREMENT ALLOWANCES. 

« 

employers generally declare that such provision for the employees is 
good business policy, since it results in creating among their subor- 
dinates a sense of loyalty and an interest in the business, as well as a 
feeling of permanency in their employment, which are of benefit to 
the employer as well as to the employee. It would seem, at first 
thought, that a policy that had been found advantageous by our 
great commercial institutions in dealing with their employees would 
be equally advantageous to the Government. A more careful com- 
parison of the commercial and the Government services discloses the 
fact, however, that conditions of employment in the two services 
are wholly different, and that what has proved beneficial to one 
would prove equally harmful to the other. This is clearly brought 
out in the report entitled, "Savings and Annuity Plan Proposed for 
Retirement of Superannuated Civil-Service Employees" (S. Doc. 
No. 745, 61st Cong., 3d sess., pp. 56, 57, 58), and since the commission 
concurs in the conclusions there set forth, the argument is given 
below: 

The question may be raised why a straight pension- should be demoralizing to the Gov- 
ernment service, when the testimony of private employers is to the effect that they have 
found it helpful in the maintenance of discipline. The answer is that conditions of em- 
ployment in the Government service are diametrically different from those in private 
service. A straight pension is a powerful aid to the ordinary employer in holding 
his men and in keeping up their standard of efficiency, as brought out by the Hon. 
Frank A. Vanderlip, president of the National City Bank of New York, in an article 
on "Insurance for workingmen," published in the North American Review in Decem- 
ber, 1905. Said he: 

"When employees realize that unsatisfactory conduct may at any time lose them 
not only their present position, a loss which in such a labor market as ours might be 
easily made good, but that it entails further the loss of a very valuable asset — the 
employee's right to a pension — the incentive to good conduct is greatly increased. It 
operates especially as an incentive to hold men between the ages of 40 and 50, when 
they have acquired the experience and skill which makes them especially valuable, 
and prevents their being tempted away by slightly increased wages for a temporary 
period." 

This statement is entirely correct when applied to business institutions. It is not 
wholly correct when applied to the Government service. A straight pension is a 
powerful aid to the Government as well as to a corporation in holding its employees, 
but there is this radical difference in its operation under the two conditions: In the 
case of the Government it operates to hold the poor employees rather than the good 
and to break down rather than to keep up the standard of efficiency. This is ex- 
plained by two fundamental differences in the conditions of labor when a private 
corporation is the employer and when the United States Government acts in that 
capacity. These are, first, the fact that there is seldom any relationship between the 
value and the cost of a Government output such as there always is in the case of a 
commodity produced by a private corporation, and, second, the fact that the man 
at the head of a Government office or shop has much less authority over his sub- 
ordinates than has an executive officer similarly placed in a private business. 

Business enterprises are conducted for the purpose of paying dividends, and as 
inefficiency on the part of an employee has a direct bearing on the dividends it will 
not be tolerated. On the other hand, the great majority of Government employees 
are not engaged in the production of commercial articles which must be sold at a profit 
in competition, and the loss to the Government through inefficiency is not so apparent 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 23 

or so easily measured. It may, for instance, cost the Government a hundred thousand 
' dollars to get out a highly scientific or technical report which is, economically, either 
at the time or ultimately in the course of years, well worth that sum of money to the 
people of the United States, but which, commercially, would not bring in a thousand 
dollars if placed on the market for sale. Since, the inefficiency of an employee 
engaged in work that has such an uncertain market value is not so easily detected or 
BO likely to be regarded as serious as would be the case in private business, he is 
usually permitted to remain in the Government service, whereas he would be very 
promptly dismissed by a private house. 

The fact that the administrative ofiicials at the head of Government offices have 
not entire control over the selection of their subordinates makes it impossible for those 
officials to be held as strictly responsible for results as is the case in private business. 
What is everybody's business is nobody's business. Since also the position of the 
executive head of the office is not greatly endangered by the incompetency of his 
assistants, especially where the effect of the incompetency can not be readily meas- 
ured by reduction in actual output of some kind, it follows that he can afford to be 
lenient with them. He is especially inclined to be so if the employee's inefficiency 
is known to be the result of old age or any other cause which makes an appeal to the 
natural feelings of humanity. In case the inefficient employee is working under a 
pension system whereby he is entitled on reaching a certain age to retire on a com- 
petence, the head of the office will be all the more reluctant to dismiss him "before he 
reaches that age. But a pension system has exactly the opposite effect where the 
private corporation is the employer. In that case the administrative official at the 
head of an office is held directly responsible either to the owner of the business or a 
board of directors for the inefficiency of his subordinates. The output can usually be 
measured in terms of tons or dollars, and if it falls below the required amount the posi- 
tion of the man in charge is jeopardized. In self-defense, therefore, he is obliged to 
hold every subordinate up to the highest standard of efficiency and to stifle any feeling 
of humanity or sympathy which might otherwise tempt him to show leniency. That 
being his state of mind, a pension system becomes a powerful aid to him in his effort 
to maintain discipline and secure obedience and industry, as explained by Mr. Van- 
derlip in the article quoted above. Undoubtedly, the reason why railroads and 
other corporations are disposed to favor the straight pension with entire control of the 
pension fund, rather than any contributory plan with a fund in any way contrelled 
by the employees, is that it helps them to approximate the establishment of military 
discipline among their subordinates. They look on a pension as a useful kind of 
strike insurance. For fear of forfeiting his pension, the employee, like the soldier, 
will sacrifice much of his personal liberty, including his right to strike for better wages 
or shorter hours. 

It would seem proper to point out also the fact that a scale of bene- 
fits that would be satisfactory for employees of a corporation would 
be wholly inadequate for employees of the Government. 

Sound Contributory Plan Solution of Problem of Super- 
annuation IN Government Service. 

The noncontributory form of pension being burdensome to the 
taxpayer and detrimental to the service, the commission beUeves 
that the only way to solve the problem of superannuation in the 
service is to establish a sound contributory plan of retirement. Of 
the various contributory plans proposed for the retirement of Govern- 
ment employees in the years when the subject was first agitated, 
some were unscientific and unsound, and all were inequitable as 
45700°— 12 i 



24 KEPOET TO THE PKESIDENT ON EETIRBMENT ALLOWANCES. 

between different classes of employees. Most of these early plans 
contemplated the creation of a common fund made up of deductions 
from the salaries of employees of different salaries and ages on a scale 
that would be sufficient to pay the annuities to all employees, without 
any aid from the Government m the payment of annuities to those 
who were too old to provide their own annuities. This meant that 
the young employees would be taxed sums not only sufficient to 
provide their own annuities, but sums that would be sufficient to pay 
the annuities to the aged employees as well. This method of provid- 
ing for those who were too old to create their own annuities by 
monthly deductions from their salaries was naturally opposed by the 
younger employees, and very properly so. 

Sound Contributory Plans Proposed in Recent Years. 

Since 190S, however, a number of bills have been introduced in 
Congress which are sound in principle and equitable as between 
individuals. Briefly, these bills provide that each employee shall 
receive an annuity based on his salary and length of service. They 
are all based on two fundamental principles, that of graduating 
deductions from salary according to the age of entrance into the 
service and that of keeping separate present and future liabilities. 
The annuities corresponding to services rendered prior to the adoption 
of the plan are to be paid out of the Federal Treasury, and all annui- 
ties corresponding to services rendered after the adoption of the plan 
are to be provided by monthl}'' deductions from the salaries of the 
employees, improved at compound interest. 

calculations as to the cost of establishing these plans. 

This proposal that annuities for services rendered prior to the 
adoption of the plan be paid out of the Federal Treasury naturally 
raised the question. For how long a period would the Government 
be required to make appropriations for that purpose and how much 
would have to be appropriated each year? Several elaborate cal- 
culations have been made to ascertain what the cost would be under 
various bills that have been introduced into Congress embodying 
tliis principle. The results of these calculations are shown on page 
159 and foUowing'of the report entitled "Savings and Annuity Plan 
Proposed for Retirement of Superannuated Civil Service Employees." 
(S. Doc. 745, 61st Cong., 3d sess.) 

The ffi:st calculation was made for the Committee on Department 
Methods (Keep Commission), and was based on table 67 of Census 
Bulletin No. 12, entitled "The Executive Civil Service of the United 
States," covering the classified employees as of June 30, 1903. The 
total number of employees included in that calculation was 103,030, 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES, 25 



and the maximum cost of paying to the survivors annuities for 
services rendered prior to the adoption of the plan equal to 1.5 per 
cent of aggregate salary was found to amount to $66,985,778 in the 
course of 67 years, as shown by the following table: 

Table I. — Showing maximum amount of annual appropriation by the Federal Gov- 
ernment necessary to provide a monthly annuity to each person in the classified civil 
service June 30, 1903, upon attaining the retirement age of 10 years {the amount of 
annuity to he 1.5 per cent of the employee's salary June 30, 1903, for each year of service 
completed j^rior to that date). 

[Based on census of employees as of June 30, 1903.] 



Year. 



1907 
1908 
1909 
1910 
1911 
1912 
1913 
1914 
1915 
1916 
1917 
1918 
1919 
1920 
1921 
1922 
1923 
1924 
1925 
1926 
1927 
1928 
1929 
1930 



Amount of 

appropriar 

tion. 



$725, 
811, 
908, 
1,025, 
1,157, 
1,258, 
1,370, 
1,466, 
1,526, 
1,570, 
1, 579, 
1,564, 
1,550, 
1, 534, 
1,531, 
1, 512, 
1, 554, 
1, 546, 
1, 550, 
1,555, 
1,571, 
1,589, 
1,617, 
1,663, 



110 

840 

188 

293 j 

181 ' 

725 [ 

710 

424 

551 

708 

132 

974 

742 \ 

636 

851 

159 



718 
588 
682 
167 
302 
981 



Year. 



1931. 
1932. 
1933. 
1934. 
1935. 
1936. 
1937. 
1938. 
1939. 
1940. 
1941. 
1942. 
1943. 
1944. 
1945. 
1946. 
1947. 
1948. 
1949. 
1950. 
1951. 
1952. 
1953. 
1954. 



Amount of 

appropriar 

tion. 



699, 
713, 
724, 
734, 
736, 
744, 
746, 
736, 
718, 
684, 
635, 
568, 
492, 
406, 
314, 
211, 
103, 
990, 
889, 
772, 
069, 
572, 
484, 
403, 



Year. 



1955. 
1956. 
1957. 
1958. 
1959. 
1960. 
1961. 
1962. 
1963. 
1964. 
1965. 
1966. 
1967. 
1968. 
1969. 
1970. 
1971. 
1972. 
1973. 
1974. 



Amount of 
appropria- 
tion. 



S331,667 

269,380 

216,046 

170,947 

133,347 

102, 450 

77, 434 

57, 499 

41,884 

29,877 

20, 829 

14,152 

9,354 

5,971 

3,697 

2,199 

1,251 

679 

346 

163 



Total ' 66,985,778 



The second calculation was made by the Bureau of the Census, and 
was based on cards used in the compilation of Census Bulletin No. 94, 
entitled ''Statistics of Employees of the Executive Civil Service of 
the United States," covering the classified employees as of June 30, 
1907. The total number of employees included in this inquiry was 
170,228, and the maximum cost of paying annuities for services 
rendered prior to the adoption of the plan on the same basis of 1.5 
per cent of the employee's aggregate salary was found to amount to 
S130,581,273, in the course of 78 years, as shown by the following 
table. 



26 KEPOBT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 



Table II. — Showing maximum amount of annual appropriation by the Federal Gov- 
ernment necessary to provide a quarterly annuity to each person in the classified civil 
service June 30, 1907, upon attaining retirement age (the amount of annuity to be 1.5 
per cent of the employee's salary for each year of service completed prior to that date). 

[Based on census of employees as of June 30, 1907.] 



Years after the introduction of the plan. 



Aggregate annuities payable quarterly. 



Total. 


To general 
employees 
retiring at 
age of 70. 


To letter 
carriers and 
rural car- 
riers retir- 
ing at age 
of 65. 


To railway 

postal 
clerks retir- 
ing at age 
of 60. 


$1, 121, 795 


S706,290 


$156,449 


$259,056 


1,261,819 


803, 660 


187,943 


270,216 


1,390,485 


892,056 


217,500 


280,929 


1,556,632 


1,020,092 


246,545 


289,995 


1,705,135 


1,123,599 


273,947 


307,589 


1,861,499 


1,249,851 


294,011 


317,637 


2,003,086 


1,358,948 


312,044 


332,094 


2, 129, 118 


1,449,713 


326,639 


352,766 


2,252,506 


1,532,090 


347,075 


373,341 


2,317,860 


1, 553, 682 


371,103 


393,075 


2,392,028 


1,577,259 


394, 799 


419, 970 


2,441,271 


1,570,667 


424, 154 


446, 450 


2, 491, 484 


1,556,937 


459,273 


475,274 


2,559,337 


1,545,965 


503, 673 


509,699 


2,621,035 


1,537,544 


542, 928 


540.563 


2,679,979 


1,511,480 


597,995 


570,504 


2,726,937 


1,485,348 


648, 186 


593,403 


2, 791, 401 


1, 465, 143 


708,207 


618,051 


2,871,945 


1, 456, 133 


776,330 


639,482 


2,940,921 


1,438,410 


839,736 


662,775 


3,047,310 


1,465,515 


892,680 


6S9, 115 


3,138,272 


1,482,258 


940,521 


715,493 


3,235,543 


1,508,111 


989,799 


737,633 


3,323,097 


1,530,210 


1,036,572 


756,315 


3,390,712 


1,549,001 


1,072,848 


768,863 


3,442,268 


1,548,476 


1,122,372 


771,420 


3,469,245 


1,544,175 


1, 154, 148 


770,922 


3, 481, 754 


1,538,943 


1,178,888 


763,923 


3,495,463 


1,543,358 


1,197,461 


754,644 


3,483,861 


1,546,149 


1,197,318 


740,394 


3,454,704 


1,547,352 


1,188,837 


718,515 


3,419,266 


1,552,364 


1,172,208 


694, 694 


3,373,275 


1,561,293 


1,146,978 


665,004 


3,314,099 


1,564,071 


1,114,770 


635,258 


3,232,814 


1,551,927 


1,079,298 


601,589 


3,135,067 


1,529,148 


1,040,360 


565,559 


3,021,176 


1,498,314 


994,292 


528,570 


2,901,416 


1,463,090 


946,731 


491,595 


2,767,554 


1,421,790 


892,842 


452,922 


2,618,430 


1,367,819 


836,651 


413,960 


2,466,544 


1,313,333 


778,416 


374,795 


2,302,036 


1,245,255 


720, 110 


336,671 


2, 132, 720 


1,169,589 


662,490 


300,641 


1,964,236 


1,094,285 


602,976 


266,975 


1,792,997 


1,014,722 


642,571 


235,704 


1,618,516 


927,968 


483,713 


206,835 


1,449,172 


842,132 


426,686 


180,354 



Less than 1 year 

1 year 

2 years 

3 years 

4 years 

5 years 

6years 

7 years 

8 years 

9 years 

10 years 

11 years 

12 years 

13 years 

14 years 

15 years 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 

36 years 

37 years 

38 years 

39 years 

40 years 

41 years 

42 years 

43 years 

44 years 

45 years 

46 years 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 27 



Table II. —Showing maximum amount of annual appropriation by the Federal Gov- 
ernment necessary to provide a quarterly annuity to each person in the classified civil 
service June SO, 1907, etc. — Continued. 



Years after the introduction of the plan. 



47 years . . . 

48 years... 

49 years... 

50 years . . . 

51 years... 

52 years... 

53 years 

54 years 

65 years 

56 years 

57 years 

58 years 

69 years 

60 years 

61 years 

62 years 

63 years 

64 years 

65 years 

66 years 

67 years 

68 years 

69 years 

70 years 

71 years 

72 years 

73 years 

74 years 

75 years 

76 years 

77 years 

78 years . . .* 

Total 



Aggregate annuities payable quarterly. 



Total. 



283,841 

125, 133 

977, 446 

840, 125 

714,958 

602, 139 

502,310 

415,013 

339, 457 

274,814 

220,096 

174,269 

136, 301 

105, 195 

80,036 

59,950 

44, 149 

31, 914 

22, 601 

15, 645 

10, 562 

6,937 

4,413 

2,709 

1,600 

902 

483 

248 

124 

54 

23 

6 



130, 581, 273 



To general 
employees 
retiring at 
age of 70. 



$754,800 

667,842 

584,828 

505,410 

431, 711 

364,316 

304,260 

251,508 

205, 707 

166, 464 

133, 232 

105,399 

82,353 

63,495 

48,258 

36, 114 

26, 576 

19,206 

13,608 

9,432 

6,386 

4,212 

2,700 

1,677 

1,007 

581 

320 

171 

89 

42 

18 

6 



69,547,243 



To letter 
carriers and 
rural car- 
riers retir- 
ing at age 
of 65. 



$372,822 

322,910 

277,866 

237,479 

201, 518 

169,715 

141,797 

117, 483 

96, 476 

78, 473 

63, 182 

50, 321 

39, 605 

30,765 

23,568 

17,777 

13,181 

9,588 

6,830 

4,752 

3,219 

2,117 

1,344 

819 

477 

264 

137 

66 

30 

12 

5 



To railway 

postal 
clerks retir- 
ing at age 
of 60. 



36,325,671 



$156,219 

134,381 

114,752 

97,236 

81,729 

68,108 

56,253 

46,022 

37,274 

29,877 

23,682 

18,549 

14,343 

10,935 

8,210 

6,059 

4,392 

3,120 

2,163 

1,461 

957 

608 

369 

213 

116 

57 

26 

11 

5 



24,708,359 



The following table, taken from the report above referred to (p. 
174), shows the total and comparative cost to the Government of 
establishing a plan of retirement for employees under the terms of the 
Perkins bill (S. 1944, 61st Cong., 1st sess.) and the Gillett bill (H. R. 
22013, 61st Cong., 2d sess.). The annuities under the Gillett bill 
(H. R. 22013) are also 1.5 per cent of salary for each year of service, 
but the amount which the Government will contribute toward any one 
employee's annuity is limited to the difference between the amount 
which the employee's own savings will purchase and $600 a year. 
This table contemplates the retirement of railway postal clerks at 
age 60, of letter carriers at age 65, and of all other employees at age 70. 



28 KEPOET TO THE PKESIDENT ON RETIREMENT ALLOWANCES. 



Table III. — Showing total and comparative cost to the Government of establishing plan 
for retiring employees under terms of Perkins hill {S. 1944) and Gillett bill {H. R. 
22013). 



Period. 



All employees. 



Excess cost 
of establish- 
ing Perkins 
bill (S. 1944) 
for all em- 
ployees over 
cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for all em- 
ployees. 



Cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for all em- 
ployees. 



Cost of es- 
tabhshLng 
Perkins bill 
(S. 1944) 
for all em- 
ployees 



General employees. 



Excess cost 
of establish- 
ing Perkins 
bill (S. 1944) 

for general 

employees 
over cost of 
establishing 

Gillett bill 
(H.R. 22013) 

for general 
employees. 



Cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for general 
employees. 



Cost of es- 
tablishing 

Perkins bill 

(S. 1944) 
for general 

employees. 



$43,525,993 $87,055,280 



$130,581,273 



$37,366,001 



$32,181,242 



Immediately 

lyear 

2years 

Syears 

4 years 

5 years 

6 years 

7 years 

Syears , 

9 years 

10 years , 

11 years , 

12 years , 

13 years , 

14 years 

15 years 

16 years 

ITyears 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 

36 years 

37 years 

38 years 

39 years 

40 years 

41 years 



143,251 
169,714 
188,507 
220,200 
249,315 
287,703 
327,280 
355,677 
389,989 
407,830 
429, 763 
437,813 
445,360 
460,260 
485,707 
500,456 
517,114 
633,993 
564,221 
588,925 
640,838 
686,504 
742,475 
804,487 
864,296 
908,608 
956,207 
005,355 
060, 186 
125,442 
180,277 
227,543 
304,964 
365,805 
408,406 
431,587 
440, 830 
440,176 
425,883 
394,017 
356,629 
295, 772 



978,544 
1,092,105 
1,201,978 
1,336,432 
1,455,820 
1,573,796 
1,675,806 
1,773,441 
1,862,517 
1,910,030 
1,962,265 
2,003,458 
2,046,124 
2,099,077 
2,135,328 
2, 179, 523 
2,209,823 
2,257,408 
2,307,724 
2,351,996 
2,406,472 
2,451,768 
2, 493, 068 
2,518,610 
2,526,216 
2,533,760 
2, 513, 038 
2,476,399 
2,435,277 
2,358,419 
2,274,427 
2,191,723 
2,068,311 
1,948,294 
1,824,408 ; 
1,703,480 
1,580,346 I 
1,461,240 
1,341,671 
1,224,413 
1,109,915 \ 
1,006,264 . 



1,121,795 
1,261,819 
1,390,485 
1,556,632 
1,705,135 
1,861,499 
2,003,086 
2, 129, 118 
2,252,506 
2,317,860 
2,392,028 
2,441,271 
2,491,484 
2,559,337 
2,621,035 
2,679,979 
2,726,937 
2,791,401 
2,871,945 
2,940,921 
3,047,310 
3,138,272 
3,235,543 
3,323,097 
3,390,712 
3,442,268 
3,469,245 
3,-481, 754 
3,496,463 
3,483,861 
3,454,704 
3,419,266 
3,373,275 
3,314,099 
3,232,814 
3,135,067 
3,021,176 
2,901,416 
2,767,554 
2,618,430 
2,466,544 
2,302,036 



125,977 

152,962 

171,345 

202,051 

228,645 

266,036 

303,523 

329,671 

360, 856 

375,951 

392, 179 

395, 125 

397,661 

405,974 

421,344 

426,420 

434, 885 

442, 684 

461,991 

476, 140 

514,059 

547, 619 

689, 807 

638,533 

683, 759 

717,688 

756,450 

799,975 

849,367 

907,003 

961,377 

1,019,701 

1,091,157 

1,156,078 

1,203,244 

1,233,396 

1,250,015 

1,256,497 

1,251,669 

1,229,301 

1,201,914 

1,156,808 



580,313 

650, 698 

720, 711 

818,041 

894,954 

983,815 

1,055,425 

1,120,042 

1,171,234 

1,177,731 

1,185,080 

1,175,542 

1,159,276 

1,139,991 

1,116,200 

1,085,060 

1,050,463 

1,022,459 

994, 142 

962,270 

951,456 

934, 639 

918,304 

891,677 

865, 242 

830,788 

787, 725 

738,968 

693,991 

639, 146 

585,975 

532,663 

470, 136 

407,993 

348,683 

295, 752 

.248,299 

206,593 

170, 121 

138,518 

111,419 

88,447 



9,547,243 



706,290 
803,660 
892,056 
1,020,092 
1,123,599 
1,249,851 
1,358,948 
1,449,713 
1,532,090 
1,553,682 
1,577,259 
1,570,667 
1,556,937 
1,545,965 
1,537,544 
1,511,480 
1,485,348 
1,465,143 
1,456,133 
1,438,410 
1,465,515 
1,482,258 
1,508,111 
1,530,210 
1,549,001 
1,548,476 
1,544,175 
1,538,943 
1,543,358 
1,546,149 
1,547,352 
1,552,364 
1,561,293 
1,564,071 
1,551,927 
1,529,148 
1,498,314 
1,463,090 
1,421,790 
1,367,819 
1,313,333 
1,245,255 



EEPOET TO THE PEESIDENT ON KETIEEMENT ALLOWANCES. 29 

Table III.— Showing total and comparative cost to the Government of establishing plan 
for retiring employees under terms of Perkins bill {8. 1944) and Gillett bill (E. R. 
ig^Oi^)— Continued. 



Period. 



All employees. 



Excess cost 
of establish- 
ing Perkins 
bill (S. 1944) 
for all em- 
ployees over 
cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for all em- 
ployees. 



Cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for all em- 
ployees. 



Cost of es- 
tablishing 
Perkins bill 

(S. 1944) 
for all em- 
ployees. 



General employees. 



Excess cost 
of establish- 
ing Perkins 
bill (S. 1944) 

for general 

employees 
over cost of 
establishing 

Gillett bill 
(H.R. 22013) 

for general 
employees. 



Cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for general 
employees. 



Cost of es- 
tablishing 

Perkins bill 

(S. 1944) 

for general 

employees. 



42 years 

43 years 

44 years 

45 years 

46 years 

47 years 

48 years, 

49 years , 

50 years 

51 years, 
62 years 

53 years, 

54 years, 

55 years, 

56 years, 

57 years, 

58 years , 

59 years , 

60 years 

61 years 

62 years 

63 years 

64 years 

65 years 

66 years 

67 years 

68 years 

69 years 

70 years 

71 years 

72 years 

73 years 

74 years 

75 years 

76 years 

77 years 

78 years 



230, 176 

161,036 

087,321 

004,177 

918,052 

827, 277 

735,221 

646, 230 

560, 782 

481,136 

407, 756 

342,084 

284,093 

232,472 

189,890 

152, 794 

121,568 

95,576 

74,186 

56,796 

42,844 

31,810 

23,210 

16,613 

11,648 

7,978 

5,333 

3,461 

2,176 

1,320 

768 

424 

225 

115 

51 

23 

6 



S902,544 

803,200 

705,676 

614,339 

531, 120 

456,564 

390, 112 

331,216 

279,343 

233, 822 

194,383 

160, 226 

130,920 

106, 985 

84,924 

67,302 

52,701 

40, 725 

31,009 

23, 240 

17, 106 

12,339 

8,704 

5,988 

3,997 

2,584 

1,604 

952 

533 

280 

134 

59 

23 

9 

3 



$2, 132, 720 

1,964,236 

-1,792,997 

1,618,516 

1,449,172 

1,283,841 

1, 125, 133 

977,446 

840, 125 

714,958 

602, 139 

502,310 

415,013 

339,457 

274,814 

220,096 

174, 269 

136,301 

105, 195 

80,036 

59,950 

44,149 

31,914 

22,601 

15,645 

10,502 

6,937 

4,413 

2,709 

1,600 

902 

483 

248 

124 

54 

23 

6 



11,100, 

1,039, 

974, 

897, 

820, 

739, 

657, 

577, 

500, 

428, 

362, 

303, 

250, 

205, 

166, 

133, 

105, 

82, 

63, 

48, 

36, 

26, 

19, 

13, 

9, 

9i 

i, 

2, 

1, 

1, 



326 
925 
240 
200 
001 
508 
626 
702 
504 
226 
955 
432 
338 
181 
381 
348 
493 
258 
114 
576 
206 
608 
432 
386 
212 
700 
677 
007 
581 
320 
171 
89 
42 
18 
6 



S69, 212 

54,287 

40,396 

30,043 

21,892 

15,600 

10,841 

7,320 

4,784 

3,009 

1,812 

1,034 

553 

275 

126 

51 

18 

5 

2 



30 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 



Table III. — Showing total and comparative cost to the Government of establishing plan 
for retiring employees under terms of Perkins bill (S. 1944) and Gillett bill (H. R. 
-Continued. 



Period. 



Immediately 

1 year 

2 years 

3 years 

4 years 

5 years 

6 years 

7 years 

8 years 

9 years 

10 years 

11 years 

12 years 

13 years 

14 years 

15 years ..... 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 

36 years 

37 years 

38 years 

39 years 

40 years 

41 years 

42 years 

43 years 



Mail carriers. 



Excess cost 
of establish- 
ing Perkins 
bill (S. 1944) 

for mail 
carriers over 
cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for mail 
carriers. 



$1,393,106 



789 

352 

515 

616 

758 

833 

1,070 

1,141 

1,500 

1,914 

2,159 

2,653 

2,846 

3,157 

3,361 

3,991 

4,744 

4,550 

6,028 

7,013 

8,213 

10, 120 

12,559 

15,689 

20, 100 

25, 237 

29, 099 

32, 859 

36, 263 

44, 234 

46,288 

47,214 

46,975 

47,062 

47,721 

48, 613 

48,674 

50, 036 

49, 472 

48, 877 

47,566 

42,367 

42,717 

42,981 



Cost of es- 

tabUshing 

Gillett bill 

(H.R. 22013) 

for mail 

carriers. 



$34, 932, 565 



155 
187 
216 
245 
273 
293 
310: 
325 
345 
369 
392: 
421 

456; 

500; 
539 

594 
643 
703 
770; 

832; 
884; 

930, 
977 

1,020; 

1,052 

1,097 

1,125 

1,146 

1,161 

1,153 

1,142 

1,124 

1, 100; 

1,067 

1,031 

991 

945 

896 

843 

787 

730; 

677 
619 
559 



Cost of es- 
tablishing 
Perkins bill 
(S. 1944) 
for mail 



156; 

187 
217 
246; 
273 
294 
312; 
326; 
347 
371 
394 
424 

459; 

503 
542; 
597 

648; 
708; 

776 

839; 

892; 

940, 

989 

1,036 

1,072 

1,122 

1,154 

1,178 

1,197 

1,197, 

1, 

1,172 

1, 146, 

1,114 

1,079 

1,040 

994 

946 

892; 

836; 

778 

720 

662; 

602 



Railway postal clerks. 



Excess cost 
of estabhsh- 
ing Perkins 
bill (S. 1944) 

for railway 
postal clerks 

over cost of 
estabUshing 

Gillett bill 
(H.R. 22013) 

for railway 
postal clerks. 



S4, 766, 886 



16,485 

16, 400 

16,647 

17, 533 

19,912 

20, 834 

22, 087 

24,865 

27, 633 

"29,965 

35, 425 

40,035 

44, 853 

51,129 

61,002 

70,045 

77, 485 

86,759 

96, 202 

105, 772 

118,566 

128,765 

140,109 

150,265 

160, 637 

165,683 

170, 658 

172, 521 

174, 556 

174, 205 

172, 612 

160, 628 

166, 832 

162,665 

157,441 

149, 578 

142, 141 

133,643 

124, 742 

115, 839 

107, 149 

96,597 

87,082 

78.057 



Cost of es- 
tablishing 
Gillett bill 

(H.R. 22013) 
for railway 

postal clerks. 



819,941,473 



242, 571 
253, 816 
264,282 
272,462 
287,677 
296, 803 
309, 407 
327, 901 
345,708 
363, 110 
384, 545 
406,415 
430, 421 
458,570 
479,561 
500,459 
515,918 
531,292 
543, 280 
557, 003 
570, 549 
586,728 
597, 524 
606,050 
608, 226 
605,737 
600, 264 
591, 402 
580,088 
566,189 
545, 903 
534,066 
498, 172 
472, 593 
444, 148 
415,981 
386,429 
357, 952 
328,180 
298, 121 
267, 646 
240, 074 
213,559 
188,918 



Cost of es- 
tablishing 

Perkins bill 

(S. 1944) 
for railway 

postal clerks. 



,708,359 



259,056 
270, 216 
280,929 
289,995 
307,589 
317,637 
332, 094 
352,766 
373,341 
393,075 
419, 970 
446,450 
475,274 
509, 699 
540,663 
570, 504 
593, 403 
618, 051 
639, 482 
662,775 
689,115 
715, 493 
737,633 
756,315 
768,863 
771, 420 

770. 922 

763. 923 
754,644 
740,394 
718,515 
694, 694 
665,004 
635, 258 
601,589 
565,559 
528,570 
491,595 
452,922 
413,960 
374,795 
336,671 
300,641 
266,976 



EEPOKT TO THE PEESIDENT ON EETIEEMENT ALLOWANCES. 31 



Table 111. Showing total and comparative cost to the Government of establishing plan 
for retiring employees under terms of Perlins hill (8. 1944) and Gillett bill (H. R, 
22013)— Contmued. 



Period. 



44 years . 

45 years . 

46 years . 

47 years . 

48 years . 

49 years. 

50 years . 

51 years . 

52 years. 

53 years . 

54 years . 

55 years . 

56 years . 

57 years . 

58 years . 

59 years . 

60 years . 

61 years . 

62 years . 

63 years . 

64 years . 

65 years . 

66 years . 

67 years . 

68 years . 

69 years . 

70 years . 

71 years . 

72 years . 

73 years. 

74 years . 

75 years . 

76 years. 

77 years. 



Mall carriers. 



Excess cost 
of establish- 
ing Perkins 
bill (S. 1944) 

for mail 
carriers over 
cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for mail 
carriers. 



$43,441 

44,656 

43,612 

40, 704 

36,894 

33,277 

29,840 

26,622 

23, 612 

20,809 

18,217 

15,838 

13,054 

11, 677 

9,895 

8,303 

6,883 

5,641 

4,564 

3,637 

2,847 

2,193 

1,656 

1,218 

875 

608 

408 

261 

161 

92 

48 

23 

9 

5 



Cost of es- 
tablishing 
Gillett bill 
(H.R. 22013) 
for mail 
carriers. 



$499, 130 

439,057 

383,074 

332, 118 

286,016 

244,589 

207, 639 

174,896 

146, 103 

120, 988 

99,266 

80, 638 

64,819 

51,505 

40,426 

31, 302 

23,882 

17, 927 

13,213 

9,544 

6,741 

4,637 

3,096 

2,001 

1,242 

736 

411 

216 

103 

45 

18 

7 

3 



Cost of es- 
tablishing 
Perkins bill 
(S. 1944) 
for mail 



$542,571 

483, 713 

426, 686 

372,822 

322, 910 

277,866 

237,479 

201,518 

169, 715 

141, 797 

117, 483 

96, 476 

78, 473 

63, 182 

50, 321 

39, 605 

30,765 

23,568 

17,777 

13, 181 

9,588 

6,830 

4,752 

3,219 

2,117 

1,344 

819 

477 

264 

137 

66 

30 

12 

5 



Railway postal clerks. 



Excess cost 
of estabUsh- 
ing Perkins 

bill (S. 1944) 
for railway 

postal clerks 
over cost of 
establishing 
(iillett bill 

(H.R. 22013) 
for railway 

postal clerks. 



$69,554 

61,596 

54,200 

47,373 

41, 126 

35, 445 

30,316 

25, 812 

21,640 

18,049 

14, 921 

11,202 

9,898 

7,936 

6,292 

4,925 

3,810 

2,897 

2,166 

1,597 

1,157 

812 

560 

374 

246 

153 

91 

52 

26 

12 

6 

3 



Cost of es- 
tablishing 
Gillett bill 

(H.R. 22013) 
for railway 

postal clerks. 



$166, 150 

145,239 

126, 154 

108,846 

93,255 

79,307 

66,920 

55, 917 

46,468 

38,204 

31, 101 

26,072 

19,979 

15,746 

12,257 

9,418 

7,125 

5,313 

3,893 

2,795 

1,963 

1,351 

901 

583 

362 

216 

122 

64 

31 

14 

5 

2 



Cost of es- 
tablishing 

Perkins bill 
(S. 1944) 

for railway 
postal clerks. 



$235, 704 

206,835 

180,354 

156,219 

134,381 

114,752 

97,236 

81,729 

68, 108 

56,253 

46,022 

37,274 

29,877 

23,682 

18,549 

14,343 

10, 935 

8,210 

6,059 

4,392 

3,120 

2,163 

1,461 

957 

608 

369 

213 

116 

57 

26 

11 

6 



DIFFEEENCE IN COST BETWEEN STEAIGHT PENSION AND CONTEIBU- 
TOEY PLAN CONFEEEING SAME BENEFITS. 

The following table, taken from the report referred to (p. 48), shows 
that the cost of a civil pension conferring the same benefits as the 
Perkins bill (S. 1944) and payable entirely out of the Public Treasury 
would be $232,773,690 during the next 35 years, as contrasted with 
the cost of the Perkins bill for the same period at $97,553,023. 



32 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 



Table IV. — Showing comparative cost to the Government during first S5 years of retiring 
employees on straight pensions and under the Perkins bill (S. 1944)- 



Period, 



All employees. 



Excess cost 
of retiring all 
employees 
on straight 
pensions 
over cost of 
retiring all 
employees 
tmder Per- 
kins bill dur- 
ing first 35 
years. 



Cost of retir- 
ing all em- 
ployees 
im'der 
Perkins bill 
shown for 
period of 
35 years. 



Cost of retir- 
ing all em- 
ployees on 
straight pen- 
sions confer- 
ring benefits 
of Perkins 
bill during 
first 35 years. 



General employees. 



Excess cost 
of retiring 
general em- 
ployees on 
straight pen- 
sions over 
cost of retir- 
ing general 
employees 
under Per- 
kins bill dur- 
ing first 35 
years. 



Cost of retir- 
ing general 
employees 

under 

Perkins bill 

during . 

first 35 years. 



Cost of retir- 
ing general 
employees 
on straight 

pensions 
conferring 
benefits of 
Perkins bill 

. shown 
during first 

35 years. 



Immediately. 

I year 

2years 

3 years 

4years 

5 years 

6 years 

7 years 

Syears 

9 years 

10 years 

II years 

12 years 

13 years 

14 years 

15 years 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 



$135,220,667 



$97,553,023 



$232,773,690 



$52,850,870 



$51,397,218 



$104,248,088 



14,008 

36, 503 

76,513 

127, 822 

196, 141 

277,148 

370, 553 

473,740 

572,679 

707,058. 

844, 518 

1,013,466 

1,211,119 

1,412,728 

1,641,434 

1,875,576 

2, 158, 712 

2, 489, 837 

2, 688, 165 

3,268,212 

3, 667, 342 

4,134,194 

4,661,693 

5,171,470 

5,741,268 

6,308,259 

6,853,926 

7,472,324 

8,068,838 

8,700,020 

9,358,111 

10, 020, 239 

10,644,040 

11,226,124 

11,736,887 



1,121,795 
1,261,819 
1,390,485 
1,556,632 
1,705,135 
1,861,499 
2,003,086 
2, 129, 118 
2,252,506 
2,317,860 
2,392,028 
2,441,271 
2,491,484 
2,559,337 
2,621,035 
2,679,979 
2,726,937 
2,791,401 
2,871,945 
2,940,921 
3,047,310 
3,138,272 
3,235,543 
3,323,097 
3,390,712 
3,442,268 
3,469,245 
3,481,754 
3, 495, 463 
3,483,861 
3, 454, 704 
3,419,266 
3,373,275 
3,314,099 
3,232,814 
3,135,067 



1,121,795 
1,275,827 
1,426,988 
1,633,145 
1,832,957 
2,057,640 
2,280,234 
2,499,671 
2,726,246 
2,890,639 
3,099,086 
3,285,789 
3, 504, 950 
3, 770, 456 
4,033,763 
4,321,413 
4,602,613 
4,950,113 
5,361,782 
5,629,086 
6,315,522 
6,805,614 
7,369,737 
7,984,790 
8,562,182 
9, 183, 536 
9,777,504 
10, 335, 680 
10,967,787 
11,562,699 
12, 154, 724 
12,777,377 
13,393,514 
13,968,139 
14,468,938 
14,871,954 



6,834 

20,428 

45, 745 

77,505 

125,051 

179,179 

240,654 

298,473 

341,583 

405,951 

463,689 

528,099 

596,568 

669, 621 

738,254 

813,344 

902,076 

1,006,032 

1,107,669 

1,284,459 

1, 428, 818 

1,611,255 

1,814,930 

2,010,982 

2,192,352 

2,375,382 

2,513,964 

2,721,595 

2,927,127 

3, 177, 801 

3,449,223 

3,762,363 

4,061,247 

4,350,884 

4,601,733 



706,290 
803,660 
892, 056 
1,020,092 
1,123,599 
1,249,851 
1,368,948 
1,449,713 
1,532,090 
1,553,682 
1,577,259 
1,570,667 
1,556,937 
1,645,965 
1,537,644 
1,511,480 
1,485,348 
1,465,143 
1,456,133 
1,438,410 
1,465,615 
1,482,268 
1,508,111 
1,530,210 
1,549,001 
1,648,476 
1,544,175 
1,538,943 
1,543,358 
1,546,149 
1,547,362 
1,552,364 
1,561,293 
1,564,071 
1,551,927 
1,529,148 



706,290 
810, 494 
912,484 
1,065,837 
1,201,104 
1,374,902 
1,538,127 
1,690,367 
1,830,563 
1,895,265 
1,983,210 
2,034,356 
2,085,036 
2,142,533 
2,207,165 
2,249,734 
2,298,692 
2,367,219 
2,402,165 
2,546,079 
2,749,974 
2,911,076 
3,119,366 
3,346,140 
3, 569, 983 
3,740,828 
3,919,657 
4,052,907 
4,264,953 
4,473,276 
4, 725, 163 
6,001,687 
6,323,656 
5, 625, 318 
5,902,811 
6,130,881 



KEPOET TO THE PRESIDENT ON KETIEEMENT ALLOWANCES. 



33 



Table IV. — Showing comparative cost to the Government during first 35 years of retiring 
employees on straight pensions and under the Perkins bill (S. 1944) — Continued. 



Period. 



Mail carriers. 



Excess cost 
of retiring 
maU carriers 
on straight 
pensions over 
cost of retir- 
ing mail car- 
riers under 
Perkins bill 
during first 
35 years. 



Cost of retir- 
ing mail car- 
riers under 
Perkins bill 
during first 
35 years. 



Cost of retir- 
ing mail car- 
riers on 
straiglit pen- 
sion confer- 
ring benefits 
of Perkins 
bill during 
first 35 years. 



Railway postal clerks. 



Excess cost t 
of retiring ] 
railway 
postal clerks 
on straight i 
pensions over 
cost of retir- 
ing railway 
postal clerks 

under 
Perkins bill j 
during first 
35 years. | 



Cost of retir- 
ing railway 
postal clerks 

under 

Perkins bill 

during first 

35 years. 



Cost of retir- 
ing railway 
postal clerks 
on straight 
pension con- 
ferring bene- 
fits of 
Perkins bill 
during first 
35 years. 



Immediately. 

1 year 

2 years 

3 years 

4 years 

5 years 

6 years 

7 years 

8 years 

9 years 

10 years 

11 years 

12 years 

13 years 

14 years 

15 years 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 



S57,621,100 



S26,153,595 



$83,774,695 



824,748,697 $20,002,210 



6,192 
13,082 
24,852 
39,109 
53,876 
72, 925 
94,918 
126,468 
166, 020 
214,695 
272, 414 
345,597 
435,729 
523,164 
638,916 
757,141 
899,543 
070,775 
101,083 
426, 888 
589,794 
774, 483 
985,086 
182, 184 
453,504 
717,028 
001,041 
290,758 
555, 998 
828,792 
100,427 
369, 182 
605, 161 
833,217 
051,058 



150,449 

187, 943 

217, 500 

246,545 

273,947 

294,011 

312,044 

326,639 

347, 075 

371,103 

394,799 

424,154 

459,273 

503,673 

542,928 

597,995 

648,186 

708,207 

776,330 

839,736 

892,680 

940,521 

989,799 

1,036,572 

1,072,848 

1,122,372 

1,154,148 

1,178,888 

1,197,461 

1,197,318 

1, 188, 837 

1, 172, 208 

1,146,978 

1,114,770 

1,079,298 

1,040,360 



156,449 

194, 135 

230, 582 

271,397 

313, 056 

347, 887 

384,969 

421,557 

473,543 

537,123 

609, 494 

696,568 

804, 870 

939,402 

1,066,092 

1,236,911 

1,405,327 

1,607,750 

1,847,105 

1,940,819 

2,319,568 

2,530,315 

2,764,282 

3,021,658 

3,255,032 

3, 575, 876 

3,871,176 

4,179,929 

4,488,219 

4,753,316 

5,017,629 

5,272,635 

5,516,160 

5,719,931 

5,912,515 

6,091,418 



982 

2,993 

5-, 916 

11,208 

17, 214 

25,044 

34, 981 

48,799 

65, 076 

86,412 

108, 415 

139,770 

178, 822 

219,943 

264,264 

305,091 

357,093 

413, 030 

479, 413 

556,865 

648, 730 

748, 456 

861,677 

978,304 

1,095,412 

1, 215, 849 

1,338,921 

1,459,971 

1,585,713 

1,693,427 

1, 808, 461 

1,888,694 

1,977,632 

2,042,023 

2,084,096 



259,056 
270,216 
280,929 
289,995 
307, 589 
317,637 
332,094 
352,766 
373,341 
393,075 
419,970 
446,450 
475,274 
509,699 
540,563 
570,504 
593,403 
618,051 
639,482 
662,775 
689,115 
715,493 
737,633 
756,315 
768,863 
771,420 
770, 922 
763,923 
754,644 
740,394 
718,515 
694,694 
665,004 
635,258 
601,589 
565,559 



844,750,907 



259,056 

271,198 

283,922 

295, 911 

318,797 

334, 851 

357,138 

387,747 

422, 140 

458,151 

606,382 

554, 865 

615, 044 

688,521 

760,506 

834,768 

898, 494 

975,144 

1,052,512 

1, 142, 188 

1,245,980 

1,364,223 

1,486,089 

1,617,992 

1,747,167 

1,866,832 

1,986,771 

2,102,844 

2,214,615 

2,326,107 

2,411,942 

2, 503, 155 

2,553,698 

2,612,890 

2,64.3,612 

2,649,655 



The following table, taken from the report referred to (p. 50), 
shows that the cost of a civil pension conferring the same benefits as 
the GiJlett biU (H. R. 22013) and payable entirely out of the Pubhc 
Treasury would be $232,773,690 during the next 35 years, as con- 
trasted with the cost of the Gillett bill for the same period at 
$73,136,765. 



34 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 



Table V. — Showing comparative cost to the Government during first 35 years of retiring 
employees on straight pensions and under the Gillett bill (H. R. 2201S). 



r'eriod. 



Immediately. 

lyear 

2 years 

Syears 

4years 

5 years 

6 years 

7years 

Syears 

9 years 

10 years 

11 years 

12 years 

13 years 

14 years 

15 years 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 



All employees. 



Excess cost 

of retiring all 

employees 

on straight 

pensions 

over cost of 

retiring all 

employees 

under Gillett 

bill during 

first 35 years. 



$159,636,925 



143,251 
183, 722 
225,010 
296,713 
377, 137 
483,844 
604,428 
726,230 
863,729 
980,509 
136,821 
282, 331 
458,826 
671,379 
898,435 
141,890 
392, 690 
692, 705 
054,058 
277,090 
909,050 
353,846 
876, 669 
466, 180 
035,966 
649,876 
264, 466 
859,281 
532,510 
194,280 
880,297 
585, 654 
325,203 
009,845 
634,530 
168, 474 



Cost of retir- 
ing all em- 
ployees un- 
der Gillett 
bill for first 
35 years. 



$73,136,765 

978,544 
1,092,105 
1,201,978 
1,336,432 
1,455,820 
1,573,796 
1,675,806 
1,773,441 
1,862,517 
1,910,030 
1,962,265 
2,003,458 
2,046,124 
2,099,077 
2, 135, 328 
2,179,523 
2,209,823 
2,257,408 
2,307,724 
2,351,996 
2,406,472 
2,451,768 
2,493,068 
2,518,610 
2,526,216 
2,633,660 
2,513,038 
2,476,399 
2,435,277 
2,358,419 
2,274,427 
2, 191, 723 
2,068,311 
1,948,294 
1,824,408 
1, 703, 480 



Cost of retir- 
ing all em- 
ployees on 
straight pen- 
sions confer- 
ring benefits 
of Perkins 
bill shown 
for first 35 
years. 



S232,773,690 

1,121,795 
1,275,827 
1,426,988 
1,633,145 
1,832,957 
2,057,640 
2,280,234 
2, 499, 671 
2,726,246 
2,890,539 
3,099,086 
3,285,789 
3,504,950 
3, 770, 456 
4,033,763 
4,321,413 
4,602,513 
4,950,113 
5,361,782 
5,629,086 
6,315,522 
6,805,614 
7,369,737 
7, 984, 790 
8,562,182 
9,183,536 
9,777,504 
10, 335, 680 
10, 967, 787 
11,552,699 
12,154,724 
12,777,377 
13,393,514 
13, 958, 139 
14, 458, 938 
14,871,954 



General employees. 



Excess cost 
of retiring 
general em- 
ployees on 
straight pen- 
sions over 
cost of retir- 
ing general 
employees 
under Gillett 
bill for first 
35 years. 



573,291,503 

125,977 

159,796 

191,773 

247,796 

306,150 

391,087 

482,702 

570,325 

659,329 

717,534 

798, 130 

858,814 

925,760 

1,002,542 

1,090,965 

1, 164, 674 

1,248,229 

1,344,760 

1,468,023 

1,583,809 

1,798,518 

1, 976, 437 

2,201,062 

2, 453, 463 

2,694,741 

2, 910, 040 

3,131,832 

3,313,939 

3,570,962 

3,834,130 

4, 139, 178 

4, 468, 924 

4,853,520 

5,217,325 

5,554,128 

5,835,129 



Cost of retir- 
ing general 
employees 

under GiUett 

bill shown 

for first 35 

years. 



$30,956,585 

580,313 

650, 698 

720, 711 

818,041 

894,954 

983,815 

1,055,425 

1,120,042 

1,171,234 

1, 177, 731 

1,185,080 

1,175,542 

1,159,276 

1,139,991 

1,116,200 

1,085,060 

1,050,463 

1,022,459 

994, 142 

962,270 

951, 456 

934, 639 

918, 304 

891, 677 

865,242 

830,788 

787,725 

738,968 

693, 991 

639, 146 

585,975 

532,663 

470, 136 

407, 993 

348, 683 

295,752 



Cost of retir- 
ing general 
employees 
on straight 
pensions con- 
ferring bene- 
fits of Per- 
kins bill 
shown for 
first 35 years. 



$104,248,088 

706,290 
810, 494 
912,484 
1,065,837 
1,201,104 
1,374,902 
1,538,127 
1,690,367 
1,830,563 
1,895,265 
1,983,210 
2,034,356 
2,085,036 
2,142,533 
2,207,165 
2,249,734 
2,298,692 
2,367,219 
2,462,165 
2,546,079 
2,749,974 
2,911,076 
3, 119, 366 
3,345,140 
3,559,983 
3,740,828 
3,919,557 
4,052,907 
4,264,953 
4,473,276 
4,725,153 
5,001,587 
5,323,656 
5,625,318 
5,902,811 
6,130,881 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 



35 



Table V. — Showing comparative cost to the Government during first 35 years of retiring 
employees on straight pensions and under the Gillett bill (H. R. 22013) — Continued. 



Period. 



Immediately 

1 year 

2 years 

3 years 

4years 

5 years 

6 years 

7years 

Syears 

9 years 

10 years 

11 years 

12 years 

13 years 

14 years 

15 years 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years..... 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 



Mail carriers. 



Excess cost 
of retiring 
man carriers 
on straiglit 
pensions over 
cost of retir- 
ing mail car- 
riers under 
Gillett bUl 
during first 
35 years. 



$58,189,336 



7S9 

6,544 

13,597 

25,468 

39,867 

54,709 

73,995 

96,059 

127,968 

167,934 

216,854 

275, 067 

348,443 

438,886 

526,525 

642,907 

761,885 

904,093 

1,076,803 

1,108,096 

1,435,101 

1,599,914 

1,787,042 

2,000,775 

2,202,284 

2,478,741 

2,746,127 

3,033,900 

3,327,021 

3,600,232 

3,875,080 

4,147,641 

4,416,157 

4,652,223 

4,880,938 

5,099,671 



Cost of retir- 
ing mail car- 
riers under 
Gillett bill 
shown for 
first 35 years. 



§25,585,359 



155,660 

187,591 

216,985 

245,929 

273, 189 

293, 178 

310,974 

325,498 

345,575 

369,189 

392,640 

421,501 

456,427 

500,516 

539,567 

594,004 

643,442 

703,657 

770,302 

832, 723 

884,467 

930,401 

977, 240 

1,020,883 

1,052,748 

1,097,135 

1,125,049 

1,146,029 

1,161,198 

1,153,084 

1,142,549 

1,124,994 

1,100,003 

1,067,708 

1,031,577 

991,747 



Cost of retir- 
ing mail car- 
riers on 
straight pen- 
sions confer- 
ring benefits 
of Perkins 
bill shown 
for first 35 
years. 



S83, 774, 695 



156,449 

194,135 

230,582 

271,397 

313,056 

347,887 

384,969 

421,557 

473,543 

537,123 

609,494 

696, 568 

804,870 

939,402 

1,066,092 

1,236,911 

1,405,327 

1,607,750 

1,847,105 

1,940,819 

2,319,568 

2,530,315 

2,764,282 

3,021,658 

3,255,032 

3,575,876 

3,871,176 

4,179,929 

4,488,219 

4,753,316 

5,017,629 

5,272,635 

5,516,160 

5,719,931 

5,912,515 

6,091,418 



Railway postal clerks. 



Excess cost 

of retiring 

railway 

postal clerks 
on straight 

pensions over 
cost of retk- 
ing railway 

postal clerks 

under GUlett 

bill for first 

35 years. 



828,156,086 



16,485 

17,382 

19,640 

23,449 

31,120 

38,048 

47, 731 

59,846 

76,432 

95,041 

121,837 

148,450 

184, 623 

229,951 

280, 945 

334,309 

382,576 

443,852 

509,232 

585,185 

675,431 

777,495 

888, 565 

1,011,942 

1,138,941 

1,261,095 

1,386,507 

1,511,442 

1,634,527 

1,759,918 

1,866,039 

1,969,089 

2,055,526 

2,140,297 

2,199,464 

2,233,674 



Cost of retir- 
ing railway 
postal clerks 
under Gillett 
bill shown 
for first 35 
years. 



$16,594,821 



242,571 
253,816 
261,282 
272,462 
287,677 
296,803 
309,407 
327,901 
345,708 
363,110 
384,545 
406,415 
430,421 
458,570 
479,561 
500,459 
515,918 
531,292 
543, 280 
557,003 
570,549 
586, 728 
597,524 
606,050 
608,226 
605,737 
600,264 
591,402 
580,088 
566,189 
545,903 
534,066 
498, 172 
472,593 
444,148 
415,981 



Cost of retir- 
ing railway 
postal clerks 
on straight 
pensions con- 
ferring bene- 
fits of 
Perkins bill 
shown for first 
35 years. 



$44,750,907 



259,056 

271,198 

283,922 

295,911 

318,797 

334,851 

357,138 

387,747 

422,140 

458, 151 

506,382 

554,865 

615,044 

688,521 

760,506 

834,768 

898,494 

975,144 

1,052,512 

1,142,188 

1,245,980 

1,364,223 

1,486,089 

1,617,992 

1,747,167 

1,866,832 

1,986,771 

2,102,844 

2,214,615 

2,326,107 

2,411,942 

2,503,155 

2,553,698 

2,612,890 

2,643,612 

2,649,655 



36 report to the president on retirement allowances. 

Reluctance of Congress to Provide for Eetirement of Civil 
Employees on Account of Expense. 

Congress has not been willing to pass any of these bills. Its reluc- 
tance would seem to be due to the fact that it is not yet satisfied that 
the expense incident to establishing these plans — through the pay- 
ment of annuities from the Federal Treasury to those who were too 
old to provide for themselves — is justified by the loss incurred through 
the inefficiency of aged employees. No calculations were made to 
show the saving that would result to the Government through removal 
of the superannuated as an offset to the expense necessarily incurred 
in retiring them. This calculation w^as not possible at the time, as 
no statistics showdng the actual amount of work performed by the 
. aged employees were available on which to base such calculations. 

expense of establishing proposed contributory plan justified. 

It can not be denied that any reasonably adequate plan of retire- 
ment will probably require for a number of years an appropriation 
fully equal to any reasonable estimate of the loss now suffered through 
the inefficiency of the aged. The commission believes, however, that 
such expenditure would be more than justified if at the time the plan 
takes effect a scale of deductions from the salaries of those below the 
age of retirement or thereafter entering the service is established 
which will result in 'the annual cost to the Government, say, in 20 
years being reduced to an amount less than the loss that will then 
be incurred by the Government if no plan of retirement is adopted, 
and which ultimately, say by the time all employees now in the service 
are dead, will be completely self-supporting except for the cost of 
administration and any expense that might be incurred by the Gov- 
ernment through failure to reahze the rate of interest guaranteed on 
the deposits of the employees. 

Arguments of Employees Against Contributory Plan Answered. 

Many of the employees have opposed these bills. Their opposi- 
tion is based on the following arguments : 

(1) That the deductions from salary would be burdensome and 
could only be met by an increase in salaries, which would be in effect 
a pension in disguise, since the Government would be meeting the 
expense of retiring its employees. 

(2) That a cash sum to the credit of an employee, which could only 
be obtained by resignation, would offer a constant temptation to him 
to leave the service. 

(3) That the rate of interest guaranteed on deposits of the employ- 
ees is below the rate at which the employees can safely invest their 
own savings. 



EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 37 

(4) That either of the two ways generally proposed on which an 
employee's account with the Government could be settled on his 
retirement from the service is objectionable; on the one hand, the 
granting of annuities on terms which mean the forfeiture of the accu- 
mulation not consumed in pension payments prior to death would 
cause dissatisfaction to his family, and on the other hand, the return 
in one cash sum of the entire amount to the credit of the employee 
at retirement would, in many cases, result in unwise investments and 
loss of savings, so that such employee would be worse off than if no 
plan of retirement had been provided for him. 

(5) That the fund accumulated would finally become so large as 
to be a source of graft and political demoralization. 

DEDUCTIONS FROM SALARIES OP EMPLOYEES NOW IN SERVICE SHOULD 

BE LIMITED. 

(1) In order to meet the objections of the employees concerning 
the amount of the monthly deductions required by the proposed 
contributory plans, the commission believes that the Government 
should not only agree to pay the full amount of annuities to all em- 
ployees retiring immediately, but that it should also agree to make up 
any deficit in the sum which a maximum deduction of 8 per cent from 
the salary of any employee will provide. The commission believes 
that by limiting the deduction which may be made from the salary of 
any employee to 8 per cent the objection as to the amount of the de- 
ductions will, in the main, be removed. Certainly, if the salaries 
of any of the Government's employees are so low that the saving of 8 
per cent of such salaries would work a hardship on any considerable 
number of employees, it is beyond argument that such salaries should 
be increased. If the margin between the amount of the salary and 
the cost of the bare necessities of life is so narrow as to make the 
saving of this amount impossible, then employees so situated are as 
certain to become a burden to the Government when age overtakes 
them as they are to live. It is manifest that the more quickly this 
condition is remedied by the payment of adequate salaries the less 
will be the future cost of superannuation. This commission would 
certainly recommend an increase of salaries, if such an increase is 
necessary to put the employees on a basis that would make it possible 
for them to save 8 per cent of their salaries. But the commission 
holds that such an increase, which would be a reward for services at 
the time they are rendered and for all those in the service, would be 
distinctly different from the grant of a straight pension, which would 
be a reward for services after they were rendered, and for only the 
very few who had lived to reach a certain age. As pointed out in the 
quotation from the report on civil-service retirement in Great Britain 
hereinafter referred to, the operation of compound interest would 



38 EEPORT TO THE PRESIDENT ON EETIEEMENT ALLOWANCES, 

make it possible to increase salaries and establisli a contributory 
system of retirement at less cost to the employees than to give them a 
pension system under which the benefits are paid directly from the 
Treasury, but considered a part of the payroll. An increase in salary 
is, therefore, decidedly not "a pension in disguise." 

GOVERNMENT SHOULD NOT PENALIZE EMPLOYEES LEAVING SERVICE. 

(2) The commission believes that there is little foundation m fact 
for the argument that a cash sum to the credit of an employee would 
cause him to leave the service. If a cash sum to his credit would 
enable him to better his condition outside the service, it is surely to 
his interest to have such a cash sum, rather than that a plan of retire- 
ment should be adopted which would attach a penalty to separation 
from the service, as would be the case if a civil pension were estab- 
lished under which an employee leaving the service would forfeit his 
partly earned pension. The commission believes that the Govern- 
ment should pay reasonable and fair compensation to its employees 
at the time the services are rendered, and should endeavor to hold 
its employees fairly in competition with private employers. No just 
Government will wish to do anything that could be construed as 
penalizing its employees. 

GOVERNMENT SHOULD PAY LIBERAL RATE OF INTEREST ON ENFORCED 

SAVINGS. 

(3) The commission believes that the rate of interest guaranteed 
on deposits of the employees should not be below the rate at which 
the average employee can safely invest his savings. The rate of 
interest named m most of the contributory plans that have been 
proposed has been 3| per cent, compounded annually. The com- 
mission believes that it would be fair both to the Government and to 
the employees to guarantee a minimum rate of mterest of 4 per cent, 
compounded annually, and that durmg a long period of years the Gov- 
ernment would be able to realize nearly, if not quite, this rate of 
interest if the fund were invested in the securities prescribed in the 
contributory bills heretofore proposed. These bills authorize the 
investment of the fund in substantially the classes of bonds in which 
the New England savings banks may invest their funds. If any aid 
is to be given by the Government to a plan of retirement, other than 
that necessary to establish the plan, such aid can be given most 
equitably by guaranteeing the minimum rate of interest which shall 
be paid to the employees on their deposits. On short periods of 
service there is little difference between the results obtained at 3^ 
and 4 per cent, but on long periods the results at 4 per cent are con- 
siderably greater than at 3^ per cent. A higher rate of interest 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 39 

would be desirable for two reasons : (1 ) It would mean lower monthly 
deductions from salaries, and (2) a considerably greater return to the 
employees who entered the service early in life and remained to the 
age of retirement than to the employees who entered late and retired 
eariy. It is believed also that the deposits of employees leaving the 
service or dying in the service should be returned with interest at 4 
per cent, compounded annually, the same rate as it is proposed to 
pay to those who are retired for age. 

BOTH ANNUITY AND CASH SETTLEMENTS SHOULD BE ARRANGED TO 
TROTECT INTERESTS OF EMPLOYEE. 

(4) The commission believes that either of tlie two ways generally 
proposed for settling an employee's account on retiring is inadvisable, 
but that these settlements could be so adjusted that either one of them 
would be satisfactory. 

The commission agrees with the arguments that annuities which 
mean the forfeiture of the accumulation not consumed in pension 
payments prior to death would cause dissatisfaction, and, therefore, 
believes that the annuities should be based on rates of premium which 
will enable the Government to return to the family of the deceased 
employee any balance to his credit not paid to him prior to his death. 

The commission agrees with those who contend that the return in 
one cash sum of the entire amount to the credit of the employee at 
retirement would result, in many cases, in unwise investments and 
loss of savings, and believes that an employee leaving the service after 
the age of 60 should be paid the sum to his credit, when in excess of 
S600,in not less tlian 10 annual installments. The unpaid balance of 
such deposit should be credited annually with interest at 4 per cent. 

NO DANGER IN SAVINGS FUND. 

(5) The commission believes that there is little, if anything, in the 
history of any government to justify the argument that the fund ac- 
cumulated under a contributory system would ultimately become so 
large as to cause graft and political demoralization. The system of 
postal savings banks, so well thought of in other countries as well as 
in the United States, provides for the accumulation of a trust fund at a 
far greater rate than would be possible under any plan of retirement 
based on savings of the employees. The neighboring Government of 
Canada has, moreover, not only created a trust fund by the estab- 
lishment of postal savings banks, but, satisfied with its success in that 
field, has recently established a system of Government annuities which 
enables not merely officeholders, but any citizen of the country, to 
purchase annuities From the Government. 



40 report to the president on retirement allowances. 

Commission's Effort to Ascertain Annual Loss to Government 
Through Inefficiency of Aged Employees. 

With these ideas in mind, this commission has endeavored to 
ascertain definitely the annual loss due to the incompetence of the 
aged employees, as nearly as it can be calculated, and to determine 
what expense the Government would be justified in incurring in 
order to wipe out that loss. It has also sought to modify the sug- 
gested bills in such a way as to answer the purpose of the Govern- 
ment in passing a retirement bill and at the same time meet the 
objections of the employees as far as possible. 

The only statistics that have ever been compiled concerning the 
loss sustained by the Government through superannuation were 
collected by the Civil Service Commission in 1906 and covered 
only the classified service in the District of Columbia. They showed 
the loss for one year only, and were so presented that a satisfactory 
basis for calculating the probable future loss could not be derived 
from them. On the other hand, all of the statistics that have been 
prepared thus far concerning the cost of estabhshing the various 
plans have covered the entire classified civil service and have been 
worked out to show the amount that would have to be appropriated 
by the Congress, not only the first year after the adoption of the 
plan but each year thereafter until all employees now in the service 
will have died. It will thus be seen that the statistics as to cost 
and those available as to loss were not comparable. The commis- 
sion felt that the statistics as to loss should be made complete in 
order that both sides of the account could be presented, i. e., the 
amounts that will have to be appropriated annually, on one side, 
and the savings that will result from such appropriations, on the 
other side. 

In order to consider both sides of the problem — the saving as 
well as the cost — the commission prepared a schedule, the form of 
which is shown as Appendix E of this report. The heads of depart- 
ments and bureaus were requested to fill one of these schedules for 
each member of the permanent classified civil service in the depart- 
ments and independent offices at Washington, D. C. (excluding all 
field or local service in the District of Columbia, but including per- 
sons covered by Schedule A of the civil-service rules, and including 
persons holding unclassified positions but having ehgibility for 
transfer to the competitive classified service). Schedules covering 
22,754 employees coining under this definition were returned to the 
commission, and the statistics presented in this report are based 
on the facts given in those schedules. They show that the loss from 
superannuation in the classified service in the District of Columbia 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 41 

at the time the schedules were filled amounted to $220,954, dis- 
tributed according to ages as shown in the following tables : 

Table VI. — Showing the number of employees in the classified civil service in the District 
of Columbia 70 years of age and over, the amount of salaries paid, the amount and per 
cent of salaries earned, and the amount and per cent of salaries unearned or the loss due 
to superannuation. 



Number 
of em- 
ployees. 



Total salaries. 



Paid. 



Earned. 



Amount. Per cent 



Unearned. 



Amount. Per cent 



80 years and over 

79 years 

78 years 

77 years 

76 years 

75 years 

74 years 

73 years 

72 years ...... 

71 years 

70 years 

Total 



100 
117 
169 
189 



S71,790 

33,660 

44,470 

53,405 

64,425 

96, 185 

103,250 

131,980 

144,955 

211,865 

240,325 



27, 980 

31,499 

42, 394 

53,479 

79,038 

81,519 

105,048 

121,287 

180,564 

206,062 



64.75 
83.13 
70.83 
79.38 
83.01 
82.17 
78.95 
79.59 
83.67 
85.23 
85.74 



$25,304 
5,680 
12,971 
11,011 
10,946 
17,147 
21,731 
26,932 
23,668 
31,301 
34,263 



35.25 
16.87 
29.17 
20.62 
16.99 
17.83 
21.05 
20.41 
16.33 
14.77 
11.26 



951 



1,196,310 



975,356 



81.53 



220,954 



18.47 



Calculations based on these schedules show, furthermore, that this 
loss is increasing steadily and will be doubled in the course of 20 
years. These figures are not merely conservative; they are known ta 
be less than the fact. 



RELUCTANCE OF OFFICERS TO REPORT ON INDIVIDUAL EMPLOYEES 
MAKES FIGURES OF LOSS LESS THAN THE FACT. 

In order to make the inquiry wholly impersonal, and thus remove, 
as far as possible, the natural reluctance of officers to give facts con- 
cerning the efficiency of individual employees, the commission re- 
quested the heads of departments and bureaus to detach the stub 
bearing the name of the employee at the head of the schedule before 
returning the schedule to the commission. The commission is con- 
vinced, however, that the officers making the reports were still 
reluctant to turn in schedules that rated anyone as notably inefficient, 
and that the schedules, in the aggregate, greatly understate the loss 
which the Government is sustaining through the retention of em- 
ployees who are no longer able to render efficient service. Believing, 
however, that it would be preferable to accept the returns as made by 
the departments rather than to undertake to secure any revision 
which might make it appear that the commission was endeavoring ta 
"make a case," and had thus presented statistics of loss due to super- 



42 EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

annuation that were greater than the fact, the commission has not 
attempted to modify the returns in any way, although it is apparent 
that the results are more than conservative, and perhaps do not show 
much more than half the actual loss sustained by the Government. 
The figures are useful, however, for it is possible to derive from them 
tables showing the future growth of superannuation that will take 
place if no plan of retirement is adopted. They also enable the com- 
mission to show, as an absolute offset to the cost which must be 
incurred by the Government in establishing the plan, the minimum 
amount the Government will save from the adoption of the plan of 
retirement. 



BASIS OF ESTIMATE OF FUTURE LOSSES FROM SUPERANNUATION. 

The number of employees reported by the departments as belong- 
ing to the classified civil service in the District of Columbia, distrib- 
uted according to age, salary paid, salary earned, the per cent of 
salary earned, and the per cent of salary not earned at the various 
ages, is shown by the following table, which is the basis used in 
estimating future losses from superannuation : 

Table VII. — Showing the number of employees in the classified civil service in the District 
of Columbia, distributed according to age, the total salaries paid, total salaries earned, 
the per cent of salary earned, and per cent of salary not earned. 



Age. 



(a) 

16 years 

17 years 

18 years 

19 years 

20 years 

21 years 

22 years 

23 years 

24 years 

25 years 

26 years 

27 years 

28 years 

29 years 

30 years 

31 years 

32 years 

33 years 

34 years 

35 years 

36 years 

37 years 







Number of 






Paid 
(amount). 


(6) 
17 


(c) 
$6,575 


134 


55,728 


190 


91,695 


247 


158,787 


279 


197,371 


372 


313,780 


397 


336,089 


491 


429, 138 


505 


485,025 


512 


513,169 


553 


596,750 


564 


614,945 


564 


632, 416 


547 


618,371 


666 


792,012 


638 


727,416 


624 


739,959 


623 


792,951 


625 


786,547 


645 


795,190 


636 


792,864 


589 


752,496 



Salary. 



j Earned 
Earned i (percent), 
(amount). (<^) 

(c) 



(d) 

$6,575 
55,428 
91,185 
158,009 
197,111 
313,350 
. 336, 509 
428,368 
483,751 
511,039 
595,048 
613,103 
628,996 
614,991 
788,376 
724,541 
735,737 
790,161 
782,472 
791,130 
788,729 
749,683 



(e) 

100. 00 
99.46 
99.44 
99.51 
99.87 
99.86 
99.83 
99.82 
99.74 
99.58 
99.71 
99.70 
99.46 
99.45 
99.54 
99.60 
99.43 
99.65 
99.48 
99.49 
99.48 
99.63 



Unearned 

(per cent). 

100- (e) 



(/) 



0.00 
.54 
.56 
.49 
.13 
.14 
.17 
.18 
.42 
.26 
.29 
.30 
.54 
.55 
.40 
.40 
.57 
.35 
.52 
.61 
.52 
.37 



EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 43 

Table VII. — Showing the number of employees in the classified civil service in the District 
of Columbia, distributed according to age, the total salaries paid, total salaries earned, 
the per cent of salary earned, and per cent of salary not earned — Continued. 



Age. 



Number of 
employees. 



Salary. 



Paid 
(amount). 



Earned 
(amount). 



Earned 

(percent). 

id) 

(c) 



Unearned 

(per cent). 

100- (e) 



(a) 



38 years 

39 years 

40 years 

41 years 

42 years 

43 years 

44 years 

45 years 

46 years 

47 years 

48 years 

49 years 

50 years 

51 years 

52 years 

53 years 

54 years 

55 years 

56 years 

57 years 

58 years 

59 years 

60 years 

61 years 

62 years 

63 years v 

64 years 

65 years 

66 years 

67 years 

68 years 

69 years 

70 years 

71 years 

72 years 

73 years 

74 years 

75 years 

76 years 

77 years 

78 years 

79 years 

80 years 

81 years 

82 years 

83 years 

84 years 

85 years and over. 



(&) 



615 
603 
495 
620 
609 
570 
474 
500 
444 
405 
382 
388 
397 
401 
386 
380 
303 
301 
267 
260 
261 
203 
220 
202 
218 
201 
207 
188 
242 
236 
211 
196 
189 
169 
117 
100 
84 
79 
49 
42 
35 
27 



(c) 
S791, 795 
762,361 
661,908 
831,090 
835, 573 
772,955 
648, 285 
702, 532 
602,346 
555,435 
521,387 
533, 208 
554,740 
571,574 
530,320 
499,682 
401,540 
406, 220 
355, 043 
341, 386 
344,050 
265,020 
295, 893 
250, 860 
275,470 
242,425 
271,250 
245,550 
315,796 
315,045 
281,525 
253,275 
240,325 
211, 865 
144,955 
131, 980 
103, 250 
96,185 
64, 425 
53, 405 
44, 470 
33,660 



(d) 
$785,351 
758, 131 
657,439 
825, 225 
828, 588 
766,635 
642,665 
696,472 
594,874 
548,893 
514,771 
523,063 
547,382 
562, 842 
519,138 
493, 175 
391,285 
398, 436 
344,674 
328,716 
337,946 
256,560 
285, 188 
234,518 
259,993 
229,921 
250,327 
229,501 
292, 816 
285,391 
253,816 
222,626 
206,062 
180, 564 
121,287 
105,048 
81,519 
79,038 
53, 479 
42, 394 
31,499 
27, 980 



(«) 
99.19 
99.45 
99.32 
99.29 
99.16 
99.18 
99.13 
99.14 
98.76 
98.82 
98.73 
98.10 
98.67 
98.47 
97.89 
98.70 
97.45 
98.08 
97.08 
96.29 
98.23 
96.80 
96.38 
93.49 
94.38 
94.84 
92.29 
m. 46 
92.72 
90.59 
90.16 
87.90 
85.74 
85.23 
83.67 
79.59 
78.95 
82.17 
83.01 
79.38 
70.83 
83.13 
68.37 
69.48 
66.12 
53.30 
81.74 
48.70 



44 EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

It will be observed that the trend of the figures showing the per 
cent of salary earned is shghtly downward from a very early age. 
This does not mean that, on the average, efficiency begins to decline 
from the earliest age given in the table, but it merely shows the effect 
of the present system of promoting employees with length of service 
without changing the character of their work. In order to take into 
account the loss growing out of this system of promotions, and the 
loss resulting from the practice of transferrmg the older clerks to 
work of a lower class without a corresponding reduction in salary, 
rating officers were requested to state the amount of salary earned 
by each clerk on the basis of "an efficient employee engaged on the 
class of work assigned to the employee rated," and an ''efficient 
clerk" was defined to mean "such a clerk as the Government may 
reasonably require for the salary paid." It will be seen, therefore, 
that the loss reported and shown in the table as salary unearned is 
due to the present system of disregarding to a large extent the char- 
acter of an employee's work in fixing his salary; i. e., of (a) increasing 
his salary with length of service without assigning him to a higher 
class of work ; (h) of not decreasing his salary when by reason of his 
advanced age he is assigned to a lower grade of work ; and (c) of not 
decreasing his salary when at any age he is found inefficient. 

PER CENT OF SALARY EARNED AT VARIOUS AGES. 

The per cent of salar}^ earned at the various ages remains above 99 
from the youngest age at which persons are employed in the classified 
service up to age 46, at which age the per cent of salary earned falls 
to 98.76. . From age 46 to 51, inclusive, the per cent of salary earned 
remains at 98 and a fraction. From this point on, two increasing 
tendencies in the trend of the per cents are apparent — (a) an increase 
in the variation from year to year and (b) an increase in the per 
cent of salary unearned. The increasing variation from year to year 
is due to two causes — (a) the diminishing number of employees at the 
higher ages and (b) the increasing variation in the degree to which 
individuals retain their mental and physical activity as age advances. 
It is common observation that while some aged people retain their 
mental and physical activity, others are less fortunate. 

AGE AT WHICH LOSS JUSTIFIES RETIREMENT. 

One of the purposes of this inquiry was to ascertain at what age 
the amount of loss is sufficient to justify retirement. If no aid were 
to be given by the Government to employees below the ages at which 
the salary unearned would be sufficient to pay theu* entire annuities, 
it will be seen by reference to the foregoing table that the proper age 
of retirement (assuming that the schedules show the full loss sus- 



EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 45 

tained b.y the Government from superannuation) would perhaps be 
85 years. Of the total salaries paid employees aged 85 years and 
over, they are reported to earn but 48.70 per cent. (See Table VII, 
p. 43.) It would seem apparent, therefore, that the Government 
would be the gainer by retiring all employees 85 years of age or over, 
on, say, half pay. The commission believes, however, that a plan 
of retirement which would provide only for people 85 years of age 
or over would be practically of no value, and that if the returns made 
by the departments had expressed the full loss due to superannuation, 
the results would have shown an immediate gain by retiring all persons 
at an age much below 85. 

Viewed in this light, the commission holds that it would be in the 
interest of good administration to adopt some lower age than the one 
at which the loss from superannuation equals the cost of retirement. 
It is believed that the statistics justify the adoption of age 70 as the 
proper age of retirement for employees in the departmental service in 
Washington. This belief is based on three grounds: (1) The fore- 
going table shows that at age 70 the loss from superannuation is con- 
siderable (14.26 per cent) ; (2) an inquiry covering the employees in 
one of the large offices of the Government in which the work is of such 
a character as to be capable of accurate measurement, both as to 
quantity and quality, and where it is known that the officer at the 
head of the bureau undertook to answer the commission's inquiry by 
basing the returns on an accurate record of work performed, shows 
that employees 70 years of age and over earn but 56.31 per cent of the 
salaries paid them. In this office there are 33 employees 70 years of 
age and over, the total salaries paid them amount to $40,600, and of 
this amount they are reported as not earning $17,740. Each of these 
employees could therefore be retired on $600 a year at a total cost 
to the Government the first year, over and above the present loss, of 
but $2,060; (3) 70 years is the oldest age adopted by any foreign 
Government for the retirement of civil employees. 

For these reasons the commission has adopted age 70 as the proper 
age for the retirement of employees in the classified service in Wash- 
ington. The commission believes that age 70 would also be the 
proper age of retirement for most of the employees engaged in clerical 
and professional occupations in the various services outside of Wash- 
ington. It is of course apparent that employees engaged in lines of 
work requiring special physical activity, such as that required of rail- 
way postal clerks, letter carriers, and persons employed in various 
mechanical trades, should be retired at an earlier age than 70 years. 
Earlier retirement for these classes of employment is justified because 
the physical energy usually begins to fail at an earlier age than does 
the mental. 



46 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

METHOD OF CALCULATING FUTURE LOSS TO GOVERNMENT FROM SUPER- 
ANNUATION. 

Having adopted the age of 70 as the age of retirement, it will be 
necessary to consider briefly the method of treating the statistics of 
the departments in calculating the future loss which the Government 
will sustain from superannuation if no retirement plan is adopted. 
(The statistics themselves show the amount of the loss at the present 
time.) While the percentages of loss due to superannuation given in 
Table VII, printed above, show a general tendency to increase after 
age 70, yet they present irregularities wholly inconsistent with nature, 
due to the fact, as stated above, that in the advanced ages the number 
of persons reported on is so small as not to give true averages, and 
because of the fact that with increasing age comes greater variation 
in the mental and physical activity of individuals. It would be 
wholly inconsistent with nature to assume, as the table shows, for 
example, that a greater degree of efficiency exists among persons 84 
years of age than exists among persons 83 years of age. These 
irregularities may be made to counterbalance each other, however, 
by graduation, using either a mathematical formula or the graphic 
method, or a combination of the two. In selecting a method of grad- 
uating statistics of this sort it is essential to select a method which 
will remove the inconsistencies, and yet follow faithfully the general 
tendencies of the ungraduated material. 

The method adopted by the commission for accomplishing this 
purpose was a combination of a modification of a formula first used 
by Woolhouse, the eminent English actuary, in graduating certain 
English mortality tables, and the graphic method. The greatest 
irregularities shown in the table were removed by two applications 
of this modification of Woolhouse's formula. 

The results of the second graduation were then plotted on cross- 
section paper ruled 10 by 10 to the centimeter and the remaining 
irregularities removed graphically by means of a spline. The 
ungraduated per cents, together with the results of the first and 
second graduations and the final results obtained b}^ the use of the 
spline, are shown in the diagram on the page following. 

Having established the per cent of salary unearned at age 70 and 
all ages above 70, it was possible, by making certain assumptions, to 
calculate with fair accuracy the probable future loss which the 
Government will sustain from superannuation during a period of 
years to come if no plan of retirement is adopted. In this calcula- 
tion it was assumed that the per cent of salary now unearned at a 
given age mil also be unearned by employees hereafter reaching that 
age. Since the lieads of departments and bureaus were requested 
in filling the schedules to give the ages of employees at last birthday, 



REPORT TO THE PRESIDEITT OX RETIREMENT ALLOWANCES. 47 





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48 REPORT TO THE PRESIDENT ON RETIREIVLENT ALLOWANCES. 



it was also assumed that employees, on the average, were six months 
older than the ages reported. For calculating the probability of 
living from the various ages to age 70, the Aijaerican Experience Table 
of J^CortaUty was used because that table was thougjit to represent 
fairly the probable mortality among Government employees up to 
age 70, but for calculating the probability of living from age 70, the 
Combipied or Actuaries' Table of Mortality was used because it shows 
a greater expectation of life after the age of 70 than does the Ameri- 
can table ajid was therefore a more conservative basis for the calcula- 
tion. 

The following table sl^ows the annual loss which the Government 
will sustain during the next 36 years if no plan of retirement is adopted: 

Table VIII. — Showing the annual loss that will he sustained by the Government during 
the next 36 years if no plan is adopted for retiring employees now in the classified civil 
service in the District of Columbia when 70 years of age. 



Year. 


Amount. 


Year. 


Amount. 


Year. 


Amount. 


. .. 


'$228,387 
253,019 
278,604 
303,163 
320, 7!)\ 
332,943 
342,297 
349,276 
354,325 
357,967 
360,367 
362,970 
367,308 


13. '. 


S370,481 
375,040 
381,338 
390,221 
403,111 
417,749 
432,277 
444,267 
453,885 
463, 181 
474,234 
489,358 
504,507 


26. 


$520,864 
542,952 
565, 615 


1 


14. 


27 

28 

29 


2 


15. 


3 


16 

17 


580,885 
592,148 
606,004 
617,826 
627, 915 


4 


30.. . . 


6 


18 


31 


6 


19 

20 


32 


7 


33 


8 


21 


34 


637,618 


9 


22 

23 

24 

25 


35 


645,448 


10 


36 


651,641 


11 






12 ; 











1 The amount of the loss reported by the departments and independent Government establishments is 
shown at the bottom of Table VI, on p. 41, as $220,954. This amount represents the annual loss on Nov. 3D, 
1911, while the loss shown above represents the loss that wUl take place during the following year. The 
difference in the amounts represents the increase that will take place during the year. 

Commission's Effort to Determine What Expense the .Gov- 
ernment IS Justified in Incuriiing to Avoid Loss from Super- 
annuation. 

Having ascertained the amount of the loss which the Government 
Avill sustain among employees 70 years of age and over if no plan of 
retirement is adopted, the next step was to determine what expense 
the Government may reasonably incur in order to avoid that loss. 
Very little study of the problem suffices to show that the amount of 
loss sustained by the Government from superannuation is not great 
enough to justify the enormous expense of a straight pension system, 
especially when the effect on the service is considered. Although the 
loss due to superannuation will increase as long as the service continues 



BEPORT TO THE PRESIDENT ON RETIKEJVIBNT ALLOWANCES. 49 

to grow, the cost of a straight pension will increase much more rapidly, 
being twice as great the first year as the loss from superannuation and 
continuing to grow at a greater rate than the loss from superannua- 
Jtion. There are in the departments at Washington ,951 employees 
70 years of age or older who would be ehgible for retirement immedi- 
ately. If each of these employees were pensioned at half pay with a 
maximum of $600 a year, the cost the first year would be approxi- 
mately $468,960, while the loss, as shown in the foregoing table, is 
only $228,387. This additional outlay of $240,573 the first year, and 
an increasing amount each year thereafter, can not be justified on 
any ground, when the abuses sure to result from a civil pension are 
considered. It is probable, of course, that the losses reported by 
the departments were greatly understated, but even if the loss is 
twice as great, or $456,774 a year, it still would not warrant the estab- 
lishment of a plan of retirement the probable future cost of which 
can not be calculated. 

A straight-pension plan being dismissed from consideration, the 
alternative is a contributory plan. We have seen that even a con- 
tributory plan that will ultimately be self-supporting can not be 
established mthout some expense to the Government. The Gov- 
ernment will have to incur expense in two ways: (1) In retiring 
employees who are at or above the retirement age when the plan 
takes effect, who will have no time to save the money on which to 
retire themselves; and (2) in assisting in the retirement of employees 
who are below the retirement age when the plan takes effect, and 
who will not have enough time to accumulate the whole of the amount 
necessary to retu-e themselves. In considering the amount that the 
Government can properly appropriate for such a purpose, two fac- 
tors besides the loss from superannuation must be taken into account. 
They are the maximum deduction which can reasonably be withheld 
from the employee's salary and the minimum annuity w'hich must 
be provided the employee on retirement in order to make practicable 
his elimination from the service when he reaches the age at which 
inefficiency usually begins to show. 

In the opinion of the commission, 8 per cent of salary is the maxi- 
mum amount which should be withheld from employees already in 
the service. Employees entering hereafter should be required, how- 
ever, to lay aside whatever per cent of salary is necessary to provide 
the required retirmg allowance. Reference to Table XI, on pages 54 
and 55, will show that the deductions from the salaries of new en- 
trants will not be burdensome except in the case of those who enter 
at advanced age. The commission thinks that the entrance of aged 
people into the service should be discouraged. 

In the opinion of the commission the minimum annuity which 
should be adopted is half pay, with a maximum of $600. The com- 



50 EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

mission believes that a scale of annuities governed entirely by salary 
and length of service would in many cases retire employees who 
entered the service late in life on annuities wholly inadequate for their 
maintenance, however simple their needs might be, while on the other 
hand, employees who had received large salaries for long periods 
might be retired on annuities considerably in excess of the amounts 
necessary to maintain them. The commission believes that a plan of 
retirement should be merely a means to an end, and that that end is 
greater efficiency in the public service through the retirement of 
employees after they have passed their period of greatest usefulness, 
and that this should be accomplished with as little tax upon either 
the employees or the Public Treasury as is possible. It is not the duty 
of the Government to assume control of the finances of the employees 
beyond the point that is necessary to protect itself against the reten- 
tion through sympathy of employees who are no longer capable of 
earning their salaries. The commission believes that a fair annuity 
on which employees may be retired if retained in the service to age 70 
is one-half pay, with a maximum annuity of $600. WhUe $600 is not 
sufficient to purchase the luxuries of life, it is nevertheless sufficient to 
save the employee from destitution, even if he has been so unfortunate 
as to make no other provision for his declining years. 

Plan Presented by the Commission. 

Having determined the amount of loss which the Government is 
now sustaining through the inefficiency of the aged, and settled on the 
maximum deduction from salaries which can be required, and the 
maximum annuity that should be provided, the problem was to show 
what it would cost to establish a savings and annuity plan with such 
limitations and to compare that cost with the present loss through 
superannuation. The plan therefore provides for the retirement of 
all classified civil-service employees in the District of Columbia, at 
the age of 70, on half pay, with a maximum annuity of $600, the 
annuity to be paid by the Federal Government in the case of those 
retiring immediately, but by contributions from their salaries in the 
case of all others, the Government to pay 4 per cent interest on all con- 
tributions, and the contributions never to exceed, in the case of those 
now in the service, 8 per cent of salary, the Government to provide 
the difference whenever such deduction is not sufficient to provide 
the annuity. (For the deductions from salary at various ages, see 
Table XI, pp. 54 and 55.) The total cost of such annuities, minus the 
amount contributed by the employees, would be the amount which 
the Government would be required to contribute. The following table 
shows these three items. 



BBPOBT TO THE PEESIDENT ON KETIEEMENT ALLOWANCES. 51 

Table IX. — Showing the total maximum cost of retiring at age 70 all employees now in 
the classified civil service in the District of Columbia on annuities equal to one-half pay 
{maximum, ^600), maximum deduction from salary, 8 per cent. 



Age 



95 
89 

88 
87 
86 
84 
83 
82 
81 
80 
79 
78 
77, 
76, 
75, 
74, 
73, 
72, 
71. 
70. 
69. 
68. 
67. 
66. 
65. 



Total 

annuity 

payments. 



S440 

1,831 

2,840 

2,743 

3,815 

8,533 

12,829 

18,834 

19,103 

45,987 

66,406 

96,767 

120,603 

150,696 

248,374 

288,289 

377,877 

440,793 

682,419 

821,822 

870,826 

860,220 

908,883 

883,662 

663,669 



Total 

annuity 

payments 

provided by 

employees. 



$9, 115 
29,038 
52,092 
71,382 
70,034 



Total 

appropria- 

tions.i 



1,831 

2,840 

2,743 

3,815 

8,533 

12,829 

18,834 

19,103 

45,987 

66,406 

96,767 

120, 603 

150, 596 

248,374 

288,289 

377,877 

440,793 

682,419 

821,822 

861, 711 

831, 181 

856,791 

812,279 

593,635 



Age.. 



64 
63 
62 
61 
60 
59 
58 
57 
56 
65 
54 
53 
52 
51 
50 
49 
48, 
47, 
46, 
45 
44, 
43, 
42, 
41, 
40, 



Total 

annuity 

payments. 



Total 

annuity 

payments 

provided by 

employees 



$699, 769 
645, 381 
685, 290 
604, 578 
669,234 
594,045 
721,696 
718,241 
729, 886 
804, 545 
799, 299 
978, 348 
988,731 
1,011,781 
915, 718 
867, 145 
866,990 
819,300 
788, 195 
902, 360 
700,869 
764,682 
656,828 
685,733 
575,422 



$91, 916 
96,897 
124,295 
127, 394 
167,831 
163, 116 
227, 740 
244, 931 
277,896 
341,960 
362, 722 
485,594 
645, 409 
618,021 
556,412 
556,688 
598,878 
579,828 
582, 994 
709,016 
572,033 
646,633 
572,463 
633,866 
563,528 



Total 
appropria- 
tions.! 



$607,853 
648,484 
560, 995 
477, 184 
501,403 
430, 928 
493, 956 
473,310 
451, 990 
462, 586 
436,678 
492,754 
443,322 
393, 760 
359,307 
310, 557 
268, 112 
239, 471 
205, 201 
193, 343 
128, 836 
118,049 
84,365 
51,867 
11,894 



I For net cost to Government after deducting future loss from superannuation, see Table X, p. 53. 



COST OF ESTABLISHING PROPOSED PLAN. 

The foregoing table shows merely the aggregate appropriations 
required of the Government during the next 50 years, distributed 
according to the present age of the employees who are to receive 
them, and takes no account of the saving that would result from the 
removal of the superannuated. In considering any plan of retire- 
ment it is but fair to consider not only the expense which the Gov- 
ernment must incur to establish the plan, but also the saving resulting 
from its establishment. The total appropriations given in the pre- 
ceding table are shown in the table that follows, distributed according 
to amount required each year until the plan is. finally self-supporting, 
and as an offset to these appropriations is given the loss that will 
result each year from superannuation if no plan of retirement is 
established. In the last column of this table is shown the maximum 
annual cost over the loss from superannuation, or the actual cost of es- 



52 EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

t ablishing the proposed plan. With each year, following the twentieth^ 
the annual apf)r6priati6'n required for the plan will be less than the 
amount that the Government will' lose through superannuation if no 
plan is adopted. The amounts prefixed by a minus sign ( — ) in the last 
column of the table are the annual and increasmg gains to the Gov- 
ernment under the plan. At the end of 36 years the saving under 
the plan will exceed the amount advanced in excess of the loss from 
superannuation during the first 20 years. With each succeeding 
year the saving will increase, because the appropriation required will 
diminish, imtil finally, at the end of 50 years, the plan will be self- 
supporting and no further appropriations will be required. On the 
other hand, if no plan of retirement is adopted the loss from super- 
annuation will increase as long as the service continues to grow. 

It should be remembered also that the estima»te of loss from super- 
annuation is based on the very conservative returns made by depart- 
ment chiefs, and the commission believes that in fact the loss from 
superannuation will equal the cost of the proposed plan in possibly 
8 or 10 years instead of in 20 years, and that the Government will have 
saved the entire cost of the plan in the course of 20 years instead of 
in 36 years. 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 53' 

TabIiE X. — Showing (a) the maximum amount required to he appropriated by the Govetn- 
ment to retire 22,754 employees now in the permanent classified civil service in the Dis- 
trict of Columbia on annuities equal to half pay (maximum annuity, ^600), provided 
each employee below 10 years of age be required to deposit with the Government monthly 
siich sum as will, with interest at 4 per cent, compounded annually, provide such annuity 
on reaching age 70, provided that no monthly deposit by any employee now in the service 
shall exceed 8 per cent of the monthly pay (where such monthly deposit of 8 per cent, with 
interest, will not provide the required annuity, the Government to provide the difference); 
(b) the amount of salaries paid but not earned that would be saved if all employees 
were retired at age 70; and (c) the net cost to the Government of establishing the plan, 
and the gain to the Government from its establishment. 



In years. 





1 

2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14* 
15 
16 
17 
18 
Id 
20 
21 
22 
23 
24 
25 



Maximum 

annual 

appropriar 

tion. 



(a) 
$468,960 
522, 516 
567,460 
610,584 
643,904 
648, 172 
651, 903 
646,901 
642, 127 
626,873 
614, 183 
593,564 
580,957 
566, 555 
550, 577 
537,099 
521,838 
514,465 
502,525 
486,369 
468,058 
446, 161 
421,685 
396,424 
369,837 
344,615 



Annual 
loss from 
superan- 
nuation if 
no plan of 
retirement 
is adopted. 



Net annual 
cost over 
loss from 
superan- 
nuation 
(a)- (6). 



(6) 
$228,387 
253,019 
278, 604 
303, 163 
320, 751 
332,943 
342,297 
349,276 
354,325 
357,967 
360,367 
362,970 
367,30^ 
370,481 
375,040 
381,338 
390,221 
403,111 
417,749 
432,277 
444,267 
453,885 
463, 181 
474,234 
489,358 
604,507 



(c) 
$240, 
269, 
288, 
307, 
323, 
315, 
309, 
297, 
287, 
268, 
253, 
230, 
213, 
196, 
175, 
155, 
131, 
111, 
84, 
54, 
23, 

- 7, 

- 41, 

- 77, 
-119, 
-159, 



In years 



27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 



Maximum 

annual 
appropria- 
tion. 



(a) 

$314,697 

286, 556 

257, 506 

227,781 

196,617 

167,354 

141,271 

118, 195 

97,944 

80,331 

65,155 

52,219 

41,317 

32,242 

24,786 

18,747 

13,930 

10, 151 

7,238 

5,035 

3,406 

2,231 

1,407 

849 

486 



Annual 
loss from 
superan- 
nuation if 
no plan of 
retirement 
is adopted. 



Net annual 
cost over 
loss from 
superan- 
nuation 
(a)- (6). 



(b) 
$520,864 
542,952 
565,615 
580,885 
592, 148 
606,004 
617,826 
627,916 
637,618 
645,448 
651,641 



(1) 



(c) 
-$206, 167 

- 256,396 

- 308,109 

- 353,104 

- 395,631 

- 438,650 

- 476,655 

- 509,720 

- 539,674 

- 565,117 

- 586,486 



(«L 



1 The increasing aimual loss that will take place if no plan of retirement is adopted can not be shown 
beyond the thirty-sixth year because of the large number of persons who will hereafter enter the service 
at ages above 34, and hence reach the age of 70 (frbm which age thfe loss is calculated) within the next 36 
yeafsl. 

s The gain to the Government from the establishment of the plan will continue to increase because the 
Government will be relieved of the increasing burden of superannuation, while the appropriation required 
to piit the plan into operation will diminish until finally at the end of 50 years it will cease. 

The following table shows the deductions that are required at 
various ages to provide the annuities of half pay, with maxinaum 
annuity of $600. The deductions are based on the Combined Experi- 
ence Table of Mortality and interest at 4 per cent, compounded 



54 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 



annually, and are sufficient to perniit (1) the return to an employee 
leaving the service prior to the age of retirement, of all contribu- 
tions with interest at 4 per cent, compounded annually; and (2) the 
return to the legal representatives of an employee dying after retire- 
ment, of any balance of the amount on hand at the date of retirement 
not paid in annuities. These rates are made possible by the use of 
4 per cent interest instead of 3^ per cent interest, and the elimination 
of optional settlements with retiring employees under which a selec- 
tion would be exercised against the Government, since employees in 
poor health would take cash and employees physically above the aver- 
age would take annuities. Under the proposed plan all employees 
remaining in the service to age 70 are required to take the one form 
of annuity settlement. 

Table XI. — SliovAng the amount required to he deposited monthly from various ages to 
age 70 to provide an annuity payable quarterly during remainder of life {first payment 
in 3 months after reaching age 70), such annuity to equal half pay (maximum annuity, 
§600), ivith provision for return at death of annuitant of balance on deposit at date of 
retirement and not thereafter paid in annuities. 



[Combined Experieace Table of Mortality; interest at 4 per cent, compounded annually.] 










$9.10 (purchase 






Monthly de- 










price of an an- 


jA.niour't to 




duction (ad- 










nuity of $1, 


^xtItipIi fi f?p- 




justed to near- 


Age of 


• 

Age of 
entrance 


Years of 


Amount of 


payable quar- 
terly, first pay- 
ment in 3 
months, with 


WJ-1-IL<JJ. £l UC* 

posit of $1 per 

month will 
accumulate at 
4 per cent in- 
terest com- 
pounded an- 
nually, in years 
shown in col- 
umn (c). 


Monthly 

deduction 

from 

salary 


est tenth of a 
dollar) from 
salary of em- 
ployee. (For 


retire- 
ment. 


to serv- 
ice. 


service. 


annuity.! 


provision for 

return at 
death of bal- 
ance of pur- 
chase price not 


employees in 
service when 
law takes ef- 
fect, maximum 
deduction lim- 










paid in an- 




ited to 8 per 






" 




nuities) X $600. 






cent of salary .)2 


(a) 


(6) 


(c) 


(d) 


(«) 


(/) 


(<7) 


(ft) 


70 


20 


50 


S600. 00 


$5,460.00 


$1,871.48 


2.917 


2.90 


70 


21 


49 


600.00 


6,460.00 


1,787.71 


3.054 


3.10 


70 


22 


48 


600.00 


5.460.00 


1,707.16 


3.198 


3.20 


70 


23 


47 


600.00 


5,460.00 


1,629.72 


3.350 


3.40 


70 


24 


46 


600.00 


5,460.00 


1,555.25 


3.511 


3.50 


70 


25 


45 


600.00 


5,460.00 


1,483.64 


3.680 


3.70 


70 


26 


44 


600.00 


5,460.00 


1,414.79 


3.859 


3.90 


70 


27 


43 


600.00 


5,460.00 


1,348.59 


4.049 


4.00 


70 


28 


42 


600.00 


5,460.00 


1,284.94 


4.249 


4.20 


70 


29 


41 


600.00 


5,460.00 


1,223.73 


4.462 


4.50 


70 


30 


40 


600.00 


5,460.00 


1,164.87 


4.687 


4.70 


70 


31 


39 


600.00 


5,460.00 


1,108.28 


4.927 


4.90 


70 


32 


38 


600.00 


5,460.00 


1,053.87 


5.181 


5.20 


70 


33 


37 


600. 00 


5,460.00 


1,001.55 


5.452 


5.50 


70 


34 


36 


600.00 


5,460.00 


951. 24 


5.740 


5.70 


70 


35 


35 


600.00 


5,460.00 


902.87 


(5.047 


6.00 


70 


36 


34 


600. 00 


5,460.00 


856.36 


6.376 


6.40 


70 


37 


33 


600.00 


5,460.00 


811.63 


6.727 


6.70 



1 For annual salaries of $1,200 or less the annuity will be 50 per cent of salary, 
$1,200 the annuity will be $600. 

% For annual salaries of $1,200 or less the figures shown in column (ft) are per cents of salaries, 
salaries above $1,200 the figures are dollars. 



For annual salaries above 



For annual 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 55 



Table XI.- — Showing the amount required to be deposited monthly from various ages to 
age 70 to provide an annuity payable quarterly during remainder of life, etc. — Con. 











159.10 (purchase 
price of an an- 
nuity of $1, 


Amount to 
which 3. (Ib* 




Monthly de- 
duction (ad- 
justed to near- 


Age of 
retire- 
ment. 


Age of 
entrance 
to serv- 
ice. 


Years of 
service. 


Amount of 
annuity.' 


payable quar- 
terly, lir.st pay- 
ment in 3 

months, with 

provision for 
return at 

death of bal- 


posit of $1 per 

month will 
accumulate at 
4 per cent in- 
terest com- 
pounded an- 
nually, in years 
shown in col- 


Monthly 

deduction 

from 

salary 

{e)Hli- 


est tenth of a 
dollar) from 
salary of em- 
ployee. (For 
employees in 
service when 
law takes ef- 










ance of pur- 




fect, maximum 










chase price not 
paid in an- 


umn (c). 




deduction lim- 
ited to 8 per 










nuities) X $600. 




ig) 


cent of salary .)2 

(ft) 


(a) 


(6) 


(c) 


id) 


(0 


(/) 


70 


38 


32 


S600. 00 


t'5,400.00 


$768. 63 


7.1(H 


7.10 


70 


39 


31 


600.00 


5,460.00 


727.28 


7.507 


7. ,50 


70 


40 


30 


600.00 


5,400.00 


687. 52 


7.942 


7.90 


70 


41 


29 


600.00 


5,460.00 


649. 29 


8.409 


8.40 


70 


42 


28 


600.00 


5,460.00 


012.53 


8.914 


8.90 


70 


43 


27 


600.00 


5,460.00 


577. 18 


9.460 


9.50 


70 


44 


26 


600.00 


5,400.00 


543.20 


10.0.52 


10.10 


70 


45 


25 


600.00 


5,460.00 


510. .52 


10. 695 


10.70 


70 


46 


24 


600. 00 


5,460.00 


479. 10 


11.396 


11.40 


70 


47 


23 


600.00 


5,460.00 


448.88 


12. 164 


12.20 


70 


48 


22 


600.00 


5,460.00 


419. 8;i 


13.005 


13.00 , 


70 


49 


21 


600.00 


5,460.00 


391.90 


13. 932 


13.90 


70 


50 


20 


600.00 


5,400.00 


.305.04 


14. 957 


15.00 


70 


51 


19 


600.00 


5,400.00 


339.21 


10.096 


10. 10 


70 


52 


18 


600. 00 


5, 400. 00 


3 14. .38 


17. 368 


17.40 


70 


53 


17 


600. 00 


5,400.00 


290.50 


18. 795 


18.80 i 


70 


54 


10 


COO. 00 


5,400.00 


207.54 


20.408 


20.40 1 


70 


55 


15 


600.00 


5,400.00 


245.40 


22.243 


22.20 


70 


50 


14 


600.00 


5,400.00 


224. 23 


24.350 


24.40 


70 


57 


13 


600.00 


5,400.00 


203.82 


20.788 


20.80 


70 


58 


12 


600.00 


5, 400. 00 


184. 19 


29. 643 


29. CO ' 


70 


59 


11 


600.00 


5,400.00 


105.32 


33.027 


33.00 


70 


CO 


10 


600.00 


5, '400. 00 


147. 18 


37.097 


37.10 


70 


01 


9 


600.00 


5,400.00 


129.73 


42.087 


42.10 


70 


02 


8 


600.00 


5, 400. 00 


112.95 


48. .340 


48.30 


70 


C3 


7 


600.00 


5, 400. 00 


90.82* 


56.393 


66.40 


70 


64 





600.00 


5, 400. 00 


81.31 


67. 150 


07.20 


70 


65 


5 


COO. 00 


5, 4(». 00 


00.40 


82.228 


82.20 


70 


60 


4 


600.00 


5, 4(iO. 00 


52.06 


104.879 


104.90 


70 


07 


3 


600.00 


5,400.00 


38.27 


142.670 


147.70 1 


70 


08 


2 


600.00 


5,400.00 


25.01 


218. 313 


218.30 { 


70 


09 


1 


000.00 


5,400.00 


12.26 


445.351 


445.40 



iFor annual salaries of $1,200 or less the annuity will be 50 per cent of Silary. For annual salaries 
above $1,200 the annuity will be $600. 

2 For annual salaries of $1,200 or le.ss the figures .shown in column (ft) are per cjiits of salaries. For 
annual salaries above $1,200 the figures are dollars. 

Recommendations of the Commission. 

As a result of its investigation, the commission makes four rec- 
ommendations, the first three referring respectively to those at the 
age of retirement when the plan goes into effect, to those remaining 
in the service after the plan goes into effect, and to those who shall 
come into the service after the plan goes into effect. The fourth 



56 EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

recommendation merely limits the application of the plan for the 
present. The recommendations are given below with the reasons 
for each: 

(1) Every employee who is 70 years of age or over should be 
retired at once on an annuity paid from the Federal Treasury equal 
to half pay, the maximum annuity to be $600. 

It has been shown that the age of 70 is the one most suitable as 
the general age of retirement for members of the civil service of the 
coiantry. All employees at that age or over when a retirement plan 
goes into effect should be retired at once in order that the benefit to 
the service from the establishment of a retirement plan may begin 
at once. The improved efficiency of the service is desired now, not 
a generation hence. The Government must assume all liability for 
annuities payable to these employees, because there is no other way 
of retiring them. They can not provide for themselves at this late 
date, and it would not be just to tax the younger employees for their 
benefit. Besides, the Government itself is the principal beneficiary 
from their retirement. 

(2) Every employee remaining in the service after the law takes 
effect should be required to lay aside monthly such sum as will, with 
interest at 4 per cent, compounded annually, provide an annuity of 
half pay on retirement at the age of retirement, the maximum annuity 
to be $600, such monthly deduction, however, to be in no case more 
than 8 per cent of the employee's salary, and in case the fund accumu- 
lated by the employee by this deduction is not sufficient to provide 
the annuity of half pay, with a maximum of $600, the Government 
should make up the difference between the sum so accumulated and 
the amount necessary to provide the annuity. In the case of em- 
ployees who retire before the age of 60, their contributions should 
be returned to them with the interest credited thereon in one sum. 
In the case of employees who retire after the age of 60 but before 
reaching the age of 70 years, their contributions when in excess of 
$600 should be returned to them with the interest credited thereon 
in not less than 10 annual installments. In the case of employees 
who remain in the service to the age of 70, their contributions should 
be returned only in the form of an annuity with a payment at death 
of the difference between the amount on deposit at the date of 
retirement and the amount paid in annuities. 

The annuity has been limited to $600 a year because of the com- 
mission's belief that the only interest which the Government has in 
cooperating in the establishment of a retirement plan is to relieve 
itself from the inefficiency due to superannuation, which is at present 
causing it considerable loss and will inevitably cause it much greater 
loss as the number of its aged employees increases. The commission, 
is of the opinion that, after the Government has protected itself 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 57 

against this loss by making retirement at a given age compulsory 
under conditions which make the destitution of the employee impos- 
sible (and such would be the case on an annuity of $600 a year), it 
has, on the one hand, little if any interest in compelling its employees 
to save money, and, on the other hand, a very questionable right to 
force those employees tg make an investment which may be less 
profitable than some of them can themselves make. 

The per cent of deduction has been limited to 8 per cent of salary 
because the commission believes that any greater deduction would be 
very burdensome to many employees. 

The commission's reasons for recommending the three methods of 
settlement stated above, and onlythose three, at the various ages are: 
That employees retiring before reaching the age of 60 years are 
ordinarily fully capable of managing their own affairs, and if they 
should, through unwise investment or othermse, lose their savings, 
they are still young enough to secure employment; that the amount to 
the credit of employees between the ages of 60 and 70 would be con- 
siderably larger than at the earlier ages, and its loss at those ages 
would probably be a far more serious matter than at an earlier age, 
and be more likely to result in an effort on the employee's part to 
reenter the service ; that the amount to the credit of employees retiring 
at age 70 should be paid only in the form of a life annuity, with return 
at death of any balance of deposit not received in annuities, {a) because 
cash settlements undoubtedly would, in many cases, result in the loss 
of the employee's savings through unwise investments, so that the 
employee would fuially be worse off than if no plan of retirement had 
been provided; (6) because if a straight annuity were granted in 
which the employee forfeited his entire principal in case of death soon 
after entering on the annuity, great dissatisfaction would result among 
the families of employees who elected to take such settlements, and 
possibly claims might be presented to the Government for the refund 
of the money paid for such annuities, on the ground that the employee 
was incompetent at the time of making the selection; (c) because by 
requiring all employees 70 years of age to accept this settlement, the 
so-called "selection" against the Government — through robust 
employees taking annuity settlements and employees in poor health 
taking cash — would be removed, and the rates charged the employees 
as a whole could safely be based on a mortality table that contem- 
plated a somewhat higher rate of mortality, and consequently a lower 
price fixed for the annuities. 

(3) Persons entering the service after the law takes effect should 
be required to lay aside the full amount necessary, with interest at 4 
per cent, compounded annually, to provide their own annuities of 
half pay with a maximum of $600. The methods of settlement on 
retirement for this group of employees should be the same as for those 
employees already in the service as described in the preceding section. 



58 EEPOKT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

To limit the deduction from the salary of a person entering the 
service after the law takes effect to 8 per cent would place a continu- 
ing burden on the Government, the amount of which could not be 
calculated in advance, and put a premium on old people entering the 
service. On the contrary, by limiting the aid from the Government 
to those already in the service now eligible for retirement and to those 
already in the service who can not provide the full annuity for them- 
selves before reaching the age of retirement, the total maximum cost 
to the Government can be definitely known in advance. The increas- 
ing deduction recjuired with advancing age of entrance to the service 
would practically prohibit aged people from entering the service, and 
this is, the commission believes, as it should be. 

(4) This retirement plan should be restricted in the beginning to 
employees in the District of Columbia. 

As superannuation is very much greater in the District than it is 
outside the District, the need of a retirement plan is much more urgent 
there than elsewhere. The statistics collected by the commission 
show that of the 22,754 employees in the classified service in the 
District of Columbia on November 1, 1911, 2,024 were 65 years of age 
or over, or a little less than 1 in 11. Employees 70 years of age or 
over numbered 951 . Aside from the fact that a retirement law is more 
needed in the District of Columbia than elsewhere, the advisability of 
thus restricting the plan at the outset is urged on the ground that it is 
desirable to proceed slowly in the inauguration of new measures. If 
the operation of the system adopted proves to be successful, it will be 
comparatively easy to extend its application, with such modification 
in detail as may seem desirable, to the Government service as a whole. 

The commission believes that the proposed savings and annuity 
plan meets all the objections that may be brought against it, and that 
the cost of establishing it is kept within the sum which, it has been 
shown in the course of this investigation, the Government will have 
to lose in the next 36 years through superannuation if no plan is 
adopted. In 20 years the annual loss from superannuation, which is 
an increasing amount, will equal the annual cost of establishing the 
retirement plan, which is a decreasing amount. In the last 16 years 
of that 36-year period the saving to the Government will equal the 
cost in the first 20 years. 

The commission presents as a result of its investigation the draft 
of a bill based on the same fundamental principles set forth in the 
preceding recommendations: 

Draft of a Bill for the Retirement of Employees in the Civil Service in 
THE District op Columbia. 

Section 1. That begmning with the first day of July next following the passage of 
this act there shall be deducted and withheld from the monthly salary, pay, or com- 
pensation of every oflScer or employee of the United States to whom {his act applies 



REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 59 

an amount computed to the nearest tenth of a dollar that will be sufficient, with interest 
thereon at four per centum per annum, compounded annually, to purchase from the 
United States, under the provisions of this act, an annuity, payable quarterly through- 
out life, for every such employee on arrival at the age of retirement, as hereinafter 
provided. The deductions herein provided for shall, in the case of employees who 
are in the service of the Government at the time this act goes into effect, not exceed 
eight per centum of the said salary, pay, or compensation; and shall be based on 
such annuity table as the Secretary of the Treasury may direct, and interest at the 
rate of four per centum per annum, compounded annually, and shall be varied to 
correspond to any change in the rate of salary, pay, or compensation of the employee. 

Sec. 2. That the amount so deducted and withheld from the salary, pay, or com- 
pensation of every employee to whom this act applies shall be deposited in the Treas- 
ury of the United States and shall be credited, together with interest at four per centum 
per annum, compounded annually, to an individual account of the employee from 
vhose salary, pay, or compensation the deduction is made, and the Secretary of the 
Treasury is hereby *directed to invest and reinvest such funds or any portion of such 
funds in any of the following securities, viz: Bonds of the United States, bonds or 
other interest-bearing obligations of any State of the United States or any legally 
authorized bonds issued for municipal purposes by any city or town which has 
been in existence as a city or town for a period of twenty-five years, and which for 
a period of ten years previous to such investment has not defaulted in the payment 
of any part of either principal or interest of any funded debt authorized to be con- 
tracted by it, and which has at such date more than 25,000 inhabitants as established 
by the last national census and whose net indebtedness dees not exceed five per 
centum of the valuation of the taxable property therein, to be ascertained by the last 
preceding valuation of the property for the assessment of taxes; or any legally author- 
ized bonds issued for municipal purposes by any city or town in the United States 
which has been in existence as a city or town for a period of twenty-five years, and 
which for a period of ten years previous to such investment has not defaulted in the 
payment of any part of either principal or interest on any funded debt authorized to 
be contracted by it, and which has at such date more than 200,000 inhabitants as 
established by the last national census, and whose net indebtedness does not exceed 
seven per centum of the valuation of the taxable property therein, to be ascertained 
by the last preceding valuation for the assessment of taxes. In this clause the 
words "net indebtedness" mean the indebtedness of any city or town, omitting 
debts created for supplying the inhabitants with water and debts created in antici- 
pation of taxes to be paid within one year and deducting the amount of sinking 
funds available for the payment of the indebtedness included. 

The moneys deducted from salaries and the income derived therefrom shall be held 
and invested, as above described, by the Secretary of the Treasury until paid, as ia 
hereafter provided. Any deficiency in the fund hereby created to carry out the pro- 
visions of this act shall be paid out of any money in the Treasury not otherwise 
appropriated. 

For the purpose of aiding the Secretary of the Treasury in investing the funds 
created by this act, a board of investment is hereby created, composed of the Treasurer 
of the United States, the Comptroller of the Currency, the person appointed by the 
Secretary of the Treasury to enforce, under his direction, the provisions of this act, 
and two persons to be designated by the President from among the employees of the 
classified civil service. The members of the board of investment shall be sworn and 
shall hold office until others are appointed and qualified in their stead. 

Sec. 3. That the retirement age herein referred to shall be seventy years, and that 
after this act takes effect no employee to whom it applies shall be permitted to remain 
in the service of the United States after attaining the age of retirement. 



60 EEPOKT TO THE PEESIDENT ON EETIREMENT ALLOWANCES. 

Sec. 4. That upon absolute separation from the classified civil service covered by 
this act prior to the age of sixty years, and only upon such separation, the employee 
may withdraw his savings in one sum, together with interest at four per centum per 
annum, compounded annually, then credited to his account, as hereinbefore provided. 
In case of the death of an employee while in the service, the amount of his savings, 
together with the interest then credited thereon, shall be paid to his legal repre- 
sentatives. 

Sec. 5. That upon separation from the classified civil service prior to the retirement 
age, but after reaching the age of sixty years, the employee shall be entitled to receive 
the amount of his savings, including the interest credited thereon, in one payment, 
but if the amount exceeds six hundred dollars payment shall be made in ten annual 
installments, the first (to be paid one year after separation) being one-tenth, with 
one year's interest at four per centum per annum, and each installment thereafter 
being one-tenth and interest at the same rate for the preceding year on the balance to 
his credit at the beginning of the year. In case of the death of an employee so sepa- 
rated from the service, the amount of his savings, together with the interest then 
credited thereon, shall be paid to his legal representatives. 

Sec. 6. That in case of reinstatement in the classified civil service any person 
who at the time of his separation therefrom received a refund under section 
four of this act shall for the purposes of this act be deemed to be a new entrant to 
the service and the monthly deduction from his salary shall be computed from the 
date of such reinstatement, unless he shall within ninety days after reinstatement 
pay to the Treasurer of the United States the amount refunded to him, with interest 
at four per centum per annum, compounded annually, in which case the same shall 
be placed to the credit of his account and the former period of service shall be counted. 

Sec. 7. That beginning with the first day of July next following the passage of this 
act every employee to whom this act applies who, at that time, shall have reached 
the retirement age shall be retired from the service and shall receive from the United 
States during the remainder of his life an annuity (payable quarterly) equal to one- 
half of the average annual salary, pay, or compensation received during the five 
years immediately preceding the taking effect of this act, such annuity not to exceed 
a maximum of six hundred dollars and to cease and determine at his death. 

Sec. 8. That beginning with the first day of July next following the passage of this 
act every employee who shall remain in the service to which this act applies shall, 
on reaching the retirement age, be retired from the service and shall receive such 
annuity, payable quarterly, as can be purchased from the United States with the de- 
ductions theretofore made from his salary, pay, or compensation, and the interest 
credited thereon as heretofore provided; and in case such annuity is less than one- 
half of his average annual pay during his entire period of service, an annuity equal 
to the difference between such annuity purchased from the United States and an 
annuity equal to one-half of his average annual salary, pay, or compensation during 
his entire period of service shall be paid to him by the United States during the 
remainder of his life, but the one annuity or the sum of the two in no case to exceed 
six hundred dollars. On the death of a person receiving an annuity under the 
provisions of this section the annuities shall cease and determine; provided, that in 
case he shall not have received in annuities sums equal to the amount of the de- 
ductions from his salary, pay, or compensation, with interest as hereinbefore pro- 
vided, the United States shall pay to his legal representatives the balance remaining 
to his credit. 

Sec. 9. That every employee to whom this act applies who shall enter the service 
of the United States after the first day of July next following the passage of this act 
shall, upon reaching the age of retirement, be retired from the service and shall receive 
from the United States during the remainder of his life an annuity, payable quarterly, 
equal to one-half of his average annual salary, pay, or compensation which he shall 



REPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 61 

have received during his entire period of service, such annuity not to exceed a 
maximum of six himdred dollars. In case of the death of such an employee prior 
to the payment to him in annuities of sums equal to the amount of the deductions 
from his salary, pay, or compensation, with interest as hereinbefore provided, the 
United States shall pay to his legal representatives the balance remaining to his 
credit. 

Sec. 10. That every employee to whom this act applies who shall continue in the 
classified service after the passage of this act, as well as every person to whom this act 
applies who may hereafter be appointed to a position or place, shall be deemed to 
consent and agree to the deductions made and provided for herein and shall receipt 
in full for the salary, pay, or compensation which may be paid monthly or at any 
other time, and such payment shall be a full and complete discharge and acquittance 
of all claims and demands whatsoever for all services rendered by such person during 
the period covered by such payment, except his claim for the benefits to which he may 
be entitled under the provisions of this act, notwithstanding the provisions of sections 
one hundred and sixty-seven, one hundred and sixty-eight, and one hundred and 
sixty-nine of the Revised Statutes of the United States and of any other law, rule, or 
regulation affecting the salary, pay, or compensation of any person or persons employed 
in the classified civil service to whom this act applies. 

Sec. 11. That the Secretary of the Treasury shall prepare and keep all needful 
tables, records, and accounts required for carrying out the provisions of this act. The 
records to be kept shall include data showing the mortality experience of the employ- 
ees in the service to which this act applies and the rate of withdrawal from such 
Bervice, and any other information pertaining to such service that may be of value and 
may serve as a guide for future valuations and adjustments of the plan for the retire- 
ment of employees. The Secretary of the Treasury shall make a detailed comparative 
report annually to Congress showing all receipts and disbursements under the provi- 
sions of this act, together with the total number of persons receiving annuities and 
the amounts paid them. 

Sec. 12. That the provisions of this act shall apply only to persons in the classified 
civil service in the executive departments and independent Government establish- 
ments in the District of Columbia whose salary, pay, or compensation is paid from 
moneys of the United States. No person serving in a position excepted from exami- 
nation as defined in the civil-service rules shall be included within the provisions of 
this act. Whenever any person becomes separated from the classified civil service 
by reason of appointment in the unclassified service, such separation shall operate 
to take him out of the provisions of this act, except as to payment of any amount 
that may be due him. The President shall have power, in his discretion, to exclude 
from the operation of this act any group of employees whose tenure of office is inter- 
mittent or of uncertain duration. 

Sec. 13. That none of the moneys mentioned in this act shall be assignable, either 
in law or equity, or be subject to execution or levy by attachment, garnishment, or 
other legal process; nor shall any moneys paid to any employee, or to the legal repre- 
sentatives of a deceased employee, be subject to the payment of the debts of such 
employee. 

Sec. 14. That for the clerical and other service and all other expenses necessary in 
carrying out the provisions of this act during the fiscal year nineteen hundred and 
, including salaries and rent in the District of Columbia, there is hereby appro- 
priated the sum of twenty thousand dollars, out of any money in the Treasury not 
otherwise appropriated. No officer or employee receiving a regular salary or com- 
pensation from the Government shall receive any additional salary or compensation 
for any service rendered in connection with the system of retiring employees pro- 
vided for by this act. 



/7/ ,, 

62 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 

Sec. 15. That the Secretary of the Treasury is hereby authorized to perform or 
cause to be performed any or all acts, and to make such rules and regulations as may be 
necessary and proper for the purpose of carrying the provisions of this act into full force 
and effect; and his decision as to the amount to be deducted, the amount of interest 
to be credited, the amount of an annuity or refund to be paid, in any case, shall be 
final and conclusive, and shall not be subject to review by any other ofScer or 
authority. 

Appendixes. 

The commission has not undertaken to discuss the actuarial prin- 
ciples involved in the statistics presented for the reason that they 
are fully set forth in Senate Document No. 745 (61st Cong., 3d sess.), 
entitled " Savings and Annuity Plan Proposed for Retirement of Super- 
annuated Civil Service Employees," and it was thought better to 
attach that document as an appendix to this report. (Appendix A.) 

The commission has not undertaken to review in its report the 
history of other countries in retiring civil employees. The expe- 
rience of England and two of its principal colonies in retiring their 
civil employees has been fully discussed in Senate Document No. 
290 (61st Cong., 2d sess.), entitled " Civil Service Retirement, Great 
Britain and New Zealand," and Senate Document No. 420 (61st 
Cong., 2d sess.), entitled ''Civil Service Retirement, New South 
Wales, Australia." It was thought better to attach these docu- 
ments as appendixes rather than to repeat their substance in the 
body of the commission's report. (Appendixes B and C.) 

The commission has not undertaken to discuss in detail the vari- 
ous bills presented to Congress for the retirement of civil employees. 
Copies of House bill 9242, House bill 19399, and Senate bill 5863, 
all of the Sixty second Congress, are, however, attached to this 
report. These bills, together with the bills set forth in Senate Docu- 
ment No. 745, above referred to — namely, bills known as the Perkins 
bill, Gillett bill, and the Austin bill — comprise the most important 
bills that have been before Congress relative to the subject of retire- 
ment allowances. (Appendix D.) 

The commission attaches to this report; a copy of the schedule 
which it prepared and distributed through the ojBices of the civil 
service in the District of Columbia, calling for information with 
regard to each employee. It is the information collected on the 
22,754 schedules returned by the departments and independent 
Government establishments which formed the basis of the calcula- 
tion as to the amount of loss sustained by the Government through 
the inefficiency of its aged employees. (Appendix E.) 

Respectfully submitted. 

F. A. Cleveland, CJmirman. 

W. F. WiLLOUGHBY. 

W. W. Warwick. 
Frank J. Goodnow. 
M. O. Chance, Secretary. 

LB '12 O 




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